17 Capital Markets Union
| Committee's assessment
| Politically important |
| Committee's decision | Not cleared from scrutiny; further information requested
|
| Document details | Commission Green Paper about a Capital Markets Union
|
| Legal base | —
|
| Department
Document numbers
| HM Treasury
(36667), 6408/15 + ADD 1, COM(15) 63
|
Summary and Committee's conclusions
17.1 The Commission has published a Green Paper, about building
a Capital Markets Union, to consult on a range of issues relating
to improving market-based financing of the EU economy. It says
that it will decide on appropriate follow-up measures on the basis
of the consultation to put in place the building blocks for such
a union by 2019. The Commission calls for responses to the questions
posed by the Green Paper by 13 May and says that it expects to
present an action plan in the summer.
17.2 The Government tells us that it welcomes the
publication of the Commission's Green Paper and the opportunity
to consider the options for developing a Capital Markets Union.
It says that, overall, it strongly supports the vision of a well-regulated
and integrated union of all 28 Member States, which maximises
the benefits of capital markets and non-bank financing for the
real economy.
17.3 We note the Government's intention to respond
quickly to the Commission's Green Paper and ask it to inform our
successor Committee of the content of that response. Meanwhile
the document remains under scrutiny.
Full details of
the documents: Green Paper: Building
a Capital Markets Union: (36667), 6408/15 + ADD 1, COM(15)
63.
Background
17.4 As early as July 2014 the new Commission President
presaged the intention to create a "Capital Markets Union"
(CMU). Lord Hill, one of the Commissioners, has specific responsibility,
amongst other matters, for the CMU.
The document
17.5 The Commission has now published this Green
Paper, about building a CMU, to consult on a range of issues relating
to improving market-based financing of the EU economy. In the
Green Paper the Commission:
· identifies
free movement of capital as one of the fundamental freedoms of
the EU;
· describes
how the degree of market integration in the EU has declined since
the financial crisis;
· explains
that the creation of a CMU is a key priority for the Commission
as it seeks to increase growth in the EU by increasing access
to finance; and
· identifies
areas for early action and then seeks views in an extensive consultation.
17.6 The Green Paper is divided into four sections.
The first sets out the rationale for creating a CMU and its objectives:
· improving
access to finance for business and infrastructure projects;
· helping
small and medium-sized enterprises (SMEs) raise finance as easily
as large companies;
· creating
a single market for capital by removing barriers to cross border
investments; and
· diversifying
sources of funding and reducing the cost of funding.
17.7 Section two comprises a brief analysis of the
existing barriers to deeper capital markets, with some comparison
between the size and maturity of EU and US markets. The analysis
also highlights the differing experiences in each Member State.
More detail is provided in the accompanying Commission Staff Working
Document "Initial reflections on the obstacles to the
development of deep and integrated EU capital markets".
Section three elaborates on the five areas identified by the Commission
for early action:
· reviewing
the Prospectus Directive to lower barriers to accessing capital
markets;
· developing
a common minimum set of comparable information for credit reporting
and assessment in order to widen the investor base for SMEs;
· creating
a regulatory framework for sustainable, high quality securitisation;
· boosting
long-term investment, in particular by supporting take up of European
Long Term Investment Funds; and
· supporting
industry led initiatives to develop a pan-EU private placement
market.
17.8 Separate public consultations have been launched
for reviewing the regulatory framework around securitisation and
reviewing the Prospectus Directive.
17.9 Section four seeks views on a range of obstacles
to cross border capital flows and is organised around three themes:
· improving
access to finance, focusing on addressing information problems
and standardisation in areas such as covered, corporate, and green
bonds;
· developing
and diversifying the supply of funding, exploring ways to bring
institutional, retail and international investors to market and
how to develop private equity and venture capital as alternative
sources of finance; and
· improving
market effectiveness, seeking comments on the single rulebook,
enforcement of EU rules, the role of the European Supervisory
Authorities, issues on reporting standards, market infrastructure
and securities law, possible obstacles to market integration via
company law, insolvency and taxation and supporting new technology.
17.10 The Commission:
· says
that it will decide on appropriate follow-up measures on the basis
of the consultation to put in place the building blocks for a
CMU by 2019;
· comments
that this may include legislative measures, though it is clear
that regulatory changes will only be sought where they are necessary;
· invites
responses to the questions posed by the Green Paper by 13 May;
and
· notes
that it will then consider what actions should be taken, with
an action plan expected in the summer.
The Government's view
17.11 In her Explanatory Memorandum of 11 March 2015
the Economic Secretary to the Treasury (Andrea Leadsom) says that
the Government welcomes the publication of the Commission's Green
Paper and the opportunity to consider the options for developing
a CMU. She comments further that:
· overall,
the Government strongly supports the vision of a well-regulated
and integrated CMU of all 28 Member States, which maximises the
benefits of capital markets and non-bank financing for the real
economy;
· it is
encouraged by the open nature of this consultation, which should
provide the Commission with a firm evidence base on which to base
policy responses, and agrees with the five areas prioritised for
action in the near term;
· the
Government supports the Commission's suggestion that EU legislation
should only be used where it is necessary and agrees that non-legislative
steps, and the effective enforcement of competition and single
market laws, should be utilised to achieve the objectives of CMU;
· the
Commission should also seek to share best practice among Member
States;
· in its
response, the Government will consider the impact and feasibility
of each of the measures proposed and their implications for growth;
· in particular,
it remains alive to subsidiarity concerns and will urge the Commission
to avoid undertaking actions or making legislative proposals that
concern matters most appropriately addressed at Member State level;
· where
legislative action is taken, the Government will urge the Commission,
the Council, and the European Parliament to subject any legislative
proposals to a rigorous impact assessment to ensure that the proposed
legislation is proportionate; and
· the
Government will engage in a dialogue with relevant industry stakeholders
and Member States as appropriate, and intends to respond to the
Commission's consultation before the period immediately preceding
the General Election begins.
Previous Committee Reports
None.
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