74 Capital Markets Union
| Committee's assessment
| Politically important |
| Committee's decision | Cleared from scrutiny
|
| Document details | Commission Green Paper about a Capital Markets Union
|
| Legal base | —
|
| Department | HM Treasury
|
| Document numbers | (36667), 6408/15 + ADD 1, COM(15) 63
|
Summary and Committee's conclusions
74.1 In February the Commission published a consultative Green
Paper, about building a Capital Markets Union. The predecessor
Committee asked that we should see the Government's response to
the Green Paper, which we now have before us.
74.2 Whilst now clearing the Green Paper from
scrutiny, we draw it and, particularly, the Government's response
to the attention of the Treasury Committee.
Full
details of the documents: Green Paper:
Building a Capital Markets Union: (36667), 6408/15 + ADD
1, COM(15) 63.
Background
74.3 In February the Commission published a Green
Paper, about building a Capital Markets Union (CMU), to consult
on a range of issues relating to improving market-based financing
of the EU economy. It said that it would 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
called for responses to the 32 questions posed by the Green Paper
by 13 May and said that it expected to present an action plan
in the summer.
74.4 Our predecessor Committee noted the Government's
intention to respond quickly to the Commission's Green Paper and
asked it to inform us of the content of that response. Meanwhile
the document remained under scrutiny.
The Minister's letter of 26 March 2015
74.5 With her letter the former Economic Secretary
to the Treasury (Andrea Leadsom) sent our predecessor Committee
the Government's response to the Green Paper. As this was received
after that Committee's last meeting in the previous Parliament
it is only now being considered.
74.6 The Government's response consisted of answers
to the Commission's 32 questions and a covering note.[ 507]
It noted that the Bank of England and the Financial Conduct Authority
would be submitting separate responses.
74.7 The Government introduced its remarks in the
covering note by saying that:
"A fully functioning single market in capital
would see more efficient allocation of capital without constraint
due to location, diversification of sources of finance for businesses,
provide confidence to investors accessing markets, and a decreased
reliance on bank funding. In turn, risk would be shared beyond
borders and national banking sectors, cushioning local shocks
and contributing to sustainable economic growth. These are ambitions
that will take time to achieve but they are of central importance
to the future growth and competitiveness of the EU and its economies."
74.8 In the covering note the Government set out
the principles it believed should underpin the development of
the Commission's Action Plan for the CMU and the actions it thought
were essential in the immediate, medium, and longer term to develop
the capital markets that would sustain and strengthen the EU into
the future. It said that in developing its priorities, it had
employed the three following principles, which would form a reasonable
basis for drawing up the Action Plan:
· every
initiative should aim to contribute to sustainable growth and
competitiveness in the EU;
· initiatives
should be assessed and prioritised on the basis of impact and
feasibility; and
· the
Commission should require a high burden of proof to justify the
creation of new market infrastructures or institutional change.
74.9 The Government then commented that the Commission's
consultation should provide a firm evidence base on which to base
policy responses and that the Action Plan must set out, on the
basis of the consultation, a set of evidenced priorities that
have impact. It suggested that in the immediate term, the CMU
Union should focus on:
· restarting
the securitisation market;
· lowering
the barriers to accessing capital markets;
· supporting
development of a pan-EU private placement market;
· opening
the market for SME lending by establishing minimum standards for
SME credit information; and
· removing
barriers to funds operating cross-border.
74.10 For the medium term, the Government suggested
that the CMU should focus on:
· establishing
vibrant venture capital markets in every Member State;
· developing
EU corporate bond markets;
· promoting
international consistency, cooperation and trade; and
· ensuring
the European Supervisory Authorities contribute to a competitive
EU.
74.11 As for the longer term, the Government suggested
that the CMU should focus on building capability in all Member
States.
74.12 But the Government also said that it did not
see value in progressing the following measures:
· transfer
of direct supervisory responsibilities to EU institutions;
· a 29th
regime for harmonisation of personal pensions;
· tax
harmonisation; and
· harmonisation
of insolvency laws.
74.13 The Government concluded its remarks in the
covering note by saying:
"Improving the provision of capital market
financing to business and achieving a single market in capital
are long term goals and will take many years to achieve fully.
We need to start now, taking action where there is a clear evidence
base in support of initiatives by the Commission and by Member
States. We can also take the time to complete further in-depth
research on some important issues where we still need to build
the evidence base to support action. With the right programme
of reforms, we should be able to look back at the end of Commission's
mandate to see significant progress, with burgeoning capital markets
in every Member State. Flows of capital between Member States
will increase, with businesses of all sizes finding it easier
to access capital both in the home market and elsewhere. Businesses
will be better informed about their financing options and the
financial sector better able to meet their funding needs. The
EU will be more competitive, with higher growth and better productivity.
The EU will be a more attractive destination for international
investors; and all investors will feel more confident about pursuing
a wider range of investment opportunities and channels.
"The issues outlined in this note are important
to the UK and, we believe, would be key drivers of this transformation.
They should form a central part of the CMU reform programme. Given
the relatively short time we have had to consider the issues in
the Green Paper, there will be areas for action which the UK may
want to build upon or has not yet identified. In particular, the
Bank of England and FCA will also submit their own responses to
this consultation. The UK is fully prepared to consider any measures
which contribute to CMU where action can be justified by evidence
and respects the principles of subsidiarity and proportionality.
In line with the Commission's Better Regulation initiative, legislative
proposals should be subject to a robust impact assessment, be
directed at achieving the Commission's own objectives for CMU
and should be pursued only where non-legislative measures are
known not to be sufficient.
"With the most developed capital markets
in Europe, the UK has a key role to play in building a Capital
Markets Union. The UK will participate actively in the debate
that follows this Green Paper to set the direction of CMU. The
Commission must act decisively and above all, the CMU Action Plan
should send a clear message: Europe is open for business."
Previous Committee Reports
Thirty-seventh Report HC 219-xxxvi (2014-15), chapter
17 (18 March 2015).
507 All of which can be seen in full at http://europeanmemorandum.cabinetoffice.gov.uk/memorandum/green-paper-building-capital-markets-union.
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