In a new report, the EU’s High-Level Forum on capital markets union offers specific recommendations on developing deeper, more dynamic and more harmonised markets across EU member states.
The EU’s High-Level Forum on capital markets union has published a comprehensive new report offering specific recommendations for achieving a European Capital Markets Union.
“Bringing about more unified EU capital markets that work for everybody is a higher priority than ever for those who want to make Europe stronger, resilient and dynamic,” writes Thomas Wieser, who chairs the High-Level Forum. “With Covid-19 it is now urgent in order to rebuild the European economy.”
The High Level Forum has brought together 28 experts from a wide spectrum of professional and national backgrounds to recommend measures to edge the EU closer to one single market for savings, investments and capital raising.
“Europe has for decades struggled to make its capital markets work as one, and to a large degree still has 27 capital markets, some fairly large, and quite a number rather small,” Weisner says, noting that the largest market, the UK, has now left the EU.
The European banking system, he adds, is not sufficient by itself to provide the amount of credit the EU economy will need to recover from the Covid-19 crisis. As such, stronger market financing is needed to stimulate economic growth.
“Providing cross-border access to simple, comparable, cost-efficient and transparent products that provide sustainable value for money is key for savings, and key for investments.”
A deep and more dynamic capital market will also enhance financing capacity to respond to climate change and facilitate a “green transition”, while also enhancing pension sustainability.
“Our recovery will not come about as hoped if we do not harness the power of all national capital markets for financing the growth of the future,” says Weisner. “With the collective power of integrated capital markets that work for all this can come about for all.”
The report offers specific measures for how a European Capital Markets Union can be achieved, the result of seven months of in-depth discussions and representing “a high degree of consensus” among the HLF members.
“The proposed recommendations address the obstacles that have discouraged EU financial operators from taking up or scaling up financial activity, especially on a cross-border basis that have reduced the attractiveness of EU markets for foreign investors and have prevented EU financial operators from competing globally on an equal footing,” the report says.
The recommendations include measures to simplify existing rules and reduce legal uncertainties that arise from the different application and enforcement practices across Member States, as well as to address high compliance costs, review investment barriers, and incentivise the use of new digital technologies.
Among others, the report specifically recommends:
- the establishment of a European Single Access Point (ESAP) for company data
- a targeted review of the securitisation framework to facilitate SME funding
- alleviation of listing rules to reduce the burden and cost for SMEs looking to raise funding via the capital markets
- legislation to establish legal certainty and clear rules for the use of crypto/digital assets
- a targeted review of CSDR (Central Securities Depositories Regulation) to strengthen the CSD passport and improve supervisory convergence and cross-currency rules to address the current fragmented provision of settlement services which discourages cross-border trading
- a targeted review of SRD 2 (Shareholder Rights Directive II) to improve harmonisation of standards across Member States and encourage cross-border investment
- standardisation of contractual terms for the use of cloud services by EU financial firms, to help them monitor and contain risks
- various changes to pension systems to ensure pension sustainability and adequacy
- targeted amendments of IDD (Insurance Distribution Directive), MiFID II and PRIIPs Regulation to improve disclosure, enhance fairness and quality of financial advice, and enhance comparability for consumers
- the establishment of a regulatory framework for open finance to leverage potential from data sharing
- harmonisation of tax definitions, processes and forms, and the introduction of a standardised system for withholding tax relief at source to reduce cross-border investment barriers
- legislative amendments to strengthen governance, powers and toolkit of ESMA and EIOPA, to address differences in supervision across Member States
The report, available here, has been submitted to the European Commission, European Parliament and European Council.