European capital markets union project revived

On the 06/07/19 at 12:03AM


Adrien Paredes-Vanheule, in Brussels

Partisans of a greater capital integration within the European Union raise their voice to support the completion of the capital markets union during European institutions's next mandate.
Panel at Brussels' European Investors Day organised by L'Agefi and Politico

MEPs for the 2019-2024 mandate have just been elected or reelected and highest positions within European political organs are yet to be filled. But the idea of completing capital markets union (CMU) in Europe is already revived.

At least six former EU political leaders and senior officials, including former Italian Prime Minister Enrico Letta, the European commission's ex-vice president Viviane Reding as well as ex-ECB vice president and former governor of Bank of France Christian Noyer, want to believe the 2019-2024 mandate will be the right one for achieving CMU.

Thus they turned into CMU's diplomats by announcing on Thursday, 6 June the launch of Markets4Europe project to promote the strategic reforms needed to fully develop and integrate the capital markets in the EU.

"Five years after the start of a comprehensive set of EU reforms, the EU’s capital markets are still too shallow and too fragmented. Creating a truly developed and integrated Capital Market Union is within reach, but only if the EU finally embarks on the serious reforms needed. These reforms must be built on a solid consensus from all corners of the EU - and must start now", said the group in a press release. 

Markets4Europe's stated goal is to work closely with the EU’s politicians and economic leaders to remove the most important obstacles to a truly integrated, competitive, and developed CMU, according to its leadership, that also include former German finance minister Peer Steinbrück, former Croatian deputy PM Martina Dalić and a former ECB vice president and ex-governor of Bank of Portugal. Markets4Europe will publish its reforms in a roadmap by next November.  

AMF draws suggestions

French financial watchdog AMF did not wait to issue a first raft of options as it published them on Thursday, 6 June. As it wishes to contribute to the 2020-2024 schedule of the new European mandate, the French regulator hopes European ambitions in sustainable finance will be filled "to redirect financial flows with the aim of supporting the energy, environmental and social transition of our economies."

AMF argues for simplifying, even reshaping European asset management texts (AIFM, MiFID 2, PRIIPS).

The implementation of a European digital strategy for financial services is also outlined by AMF which proposes to review frameworks shaping Europe's relationships with third countries within European texts on financial services.

"These work streams together shall give fresh impetus to capital market union and address companies' needs for their development", assesses AMF in a statement, mentioning pragmatic suggestions that will also aim at favouring greater convergence in the supervisory area.

In addition, AMF makes the case for simplifying, even reshaping European asset management texts (AIFM, MiFID 2, PRIIPS).

"Hence, at the occasion of the AIFM directive review, the drafting of a text defining clearer and harmonised common rules ground for asset managers should be considered (...) AMF also calls for a specific review of the MiFID II directive to reconsider a number of dispositions and to take into account the effects of Brexit", AMF explains.

Lastly, the French regulator asks to review reporting requirements "to avoid duplications and inconsistencies."

No CMU, no sustainable finance

Several speakers have advocated for the need of capital markets union in the EU at the first European Investors Day event held in Brussels on 6 June by L'Agefi together with Politico.

Says keynote speaker Jyrki Katainen, vice president at the European commission in charge of work, growth, investments and competitiveness, it is clear "EU will be more integrated in two years from now."

The former Finnish PM added that "everything related to CMU or banking union relies on trust" before sharing his doubts on the current situation in Italy that he termed "poisonous for European integration".

Without financial stability, you cannot tackle climate change issues. 

Olivier Guersent, general director, FISMA

EU's capital markets union, if achieved, will also play an important part in the success of the future pan-European pension plan (PEPP), whose first draft released last April has been "disappointing" for Karel Lannoo, CEO of think-tank CEPS. He said PEPP's first draft resulted in a fragmented product that is hardly exportable.

But no CMU is possible without financial stability, warned Olivier Guersent, general director of Fisma. "You cannot have a functioning capital markets union with a loose integration of supervisors", he also pinpointed.

According to Fisma's general director, the accomplishment of sustainable finance requires CMU. "We must redirect private investments into long-term sustainable projects", Guersent said. He later asserted that "without financial stability, climate change issues cannot be tackled".

Similar view is shared by Sirpa Pietikainen, a Finnish MEP representing center-right group EPP. She suggested a science-based approach for sustainable investments and greenhouse gas emissions reduction that will make investors and companies taking into account the "the non-action cost."

"If you do not act now, how much will it cost you later? And that cost has different shapes : economic, environmental, healthy,...", she said.

Pietikainen also highlighted greener credit ratings could help countries like Poland changing their mind on coal. She said Basel III et Solvency II texts should be reviewed as well.

Discussing the new European parliament composition, the Finnish underlined the institution was "greener but not more greener" arguing the Parliament was even more split. Finland will assume the presidency of the European Union from 1 July to 31 December 2019.

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