EU Finance Ministers convened recently to outline key priorities for establishing a Capital Markets Union (CMU) over the next five years. The overarching goal is to attract private capital to Europe, facilitating the financing of the continent’s transition to a “green” and digital economy. This strategic roadmap, endorsed by EU institutions
provides a comprehensive framework for policymakers, regulators, and market participants to navigate the evolving financial landscape. Let’s delve into the main issues identified by the ministers, delineating the roadmap for the CMU until 2029.
The Commission’s Role
The European Commission is tasked with several critical assessments and proposals aimed at fostering the development of the EU securitisation market. These include evaluating factors hindering market growth
such as the prudential treatment of securitisation for banks and insurance companies
as well as enhancing supervision to promote financial integration and stability. Harmonisation of national accounting rules is also prioritised to facilitate cross-border comparison of corporate information. Additionally
efforts to refine the pan-European pension product (PEPP) aim to offer citizens appealing pension options and ensure productive investment of pension savings.
Collaboration between the Commission, Supervisory Authorities, and EU Governments
Efforts to alleviate the regulatory burden and transaction costs, especially for smaller market participants
necessitate collaboration between the Commission, supervisory authorities, and EU governments. Harmonisation of national corporate insolvency laws is highlighted to streamline procedures and enhance consistency
particularly regarding claim ranking and insolvency triggers. The alignment of listing requirements across European stock exchanges seeks to reduce listing costs and enhance market attractiveness for equity and bond financing. Simultaneously, the focus is on facilitating access to market information and developing cross-border investment and savings products for retail investors.
Role of EU Governments
National governments play a pivotal role in providing tax incentives to incentivize companies to raise capital through shares, thus rebalancing the bias towards debt financing. Tax reform initiatives are advocated to support investment in securities, addressing personal income tax treatment concerning long-term retail investment products and capital gains/losses. Furthermore, citizens are encouraged to explore investment opportunities in capital markets as an alternative to traditional bank deposits
emphasizing financial literacy and awareness.
Initiatives within the Finance Industry
The finance industry is urged to enhance accessibility to financial services through user-friendly and secure digital interfaces for retail clients across the EU. This initiative aims to democratise access to financial markets
empowering individuals to manage their finances efficiently and make informed investment decisions.
In conclusion, the CMU priorities outlined by EU finance ministers provide a roadmap for advancing financial integration, promoting sustainable investment
and stimulating economic growth across Europe. By fostering collaboration among stakeholders and implementing targeted reforms
the EU aims to create a dynamic and resilient capital market ecosystem conducive to innovation and prosperity.