European Commission seeks to fire up Capital Markets Union plans
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The European Commission is seeking to boost investment flows and economic growth across Europe by removing barriers to fund sales, harmonising rules for covered bonds and ensuring legal certainty in cross-border transactions.
The new plans represent an renewed effort by policymakers to accelerate the development of a Capital Markets Union in Europe, a project where progress has so far been slow.
The Commission faces a race against time as it wants the new plans to be agreed by the European Parliament and European Council by 2019. Only three of the 12 proposals presented by the commission to establish the building blocks of the CMU have been fully agreed so far.
Valdis Dombrovskis, vice-president responsible for the Capital Markets Union, said:
We need to advance in three directions: European labels and passports for financial products, harmonised and simplified rules to deepen capital markets and more consistent and efficient supervision.
Investment funds provide a vital way to channel savings into the economy but the €14.3tn market in Europe remains highly fragmented along national boundaries. Asset managers face significant barriers in selling their funds and products in different countries across the EU. Only 37 per cent of conventional mutual funds and as little as 3 per cent of alternative investment funds are registered for sale in more than three member states. The removal of barriers to cross-border fund sales could save asset managers up to €440m annually and potentially provide even greater savings to end-investors by strengthening competition and widening the range of investment choices available to savers.
New rules have also been proposed to boost the €2.1tn market for covered bonds - debt instruments backed by a segregated pool of loans - which provide a safe source of long-term funding for companies. The Commission estimates that annual savings of up to €1.9bn can be achieved for corporate borrowers with the introduction new harmonised rules for the issuance of covered bonds in Europe.
The third arm of the commission’s plans will see the introduction of new rules to resolve disputes over cross border transactions. At the moment, there is no legal certainty as to which national law applies when determining who owns a claim after it has been assigned in a cross-border case. Under the new rules, the law of the country where the creditor resides will apply in any dispute, regardless of which member state’s courts or authorities examine the case.
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