On March 5, QED held its Conference on Capital Markets Union (“CMU”) in Brussels. Among the high-level speakers and panellists were Paulina Dejmek-Hack, Member of Cabinet of the President of the European Commission Mr. Juncker; Philip Tod, Capital Markets Union Acting Head of Unit, DG FISMA of the European Commission; Mr. Philippe de Backer, Member of the European Parliament (MEP); Judith Hardt, Managing Director at the Swiss Finance Council; Mr. Mark Hutchinson, Head of Alternative Credit at M&G Investments; Alexandra Hachmeister, Head of Regulatory Strategy at Deutsche Börse Group and Juan Manuel Viver, BETTER FINANCE’s Policy Officer.
Paulina Dejmek-Hack and Philip Tod from the European Commission outlined the programming of the work on Capital Market Union and explained that the Commission is planning to focus on big the big issues first, and later focus on smaller (non-legislative) issues. The emphasised that new legislation is not always the necessary tool to achieve the goals laid down in the Green Paper, non-legislative steps and the enforcement of competition law and single market rules could also be used. Their vision on CMU is less institutional and less structured than the Banking Union. They drew attention to the public consultation on CMU that is open until 13.05.2015. On 8 June 2015, the European Commission is organising a conference on CMU in Brussels. In summer, they expect to publish a CMU Action Plan detailing the forthcoming steps. Philip Tod also encouraged the participants to contribute to the open public consultations on the review of the Prospectus Directive and on securitisation, as well as mentioning a public consultation on retail financial services. (So far, no information is available on the latter.)
The first panel discussed the possible ways to achieve long-term growth in Europe. MEP Philip De Backer expressed that he wished to focus on the review of existing financial regulation in retail aspects. He also mentioned the missing private pension savings, the missing risk appetite of individual investors and that the efforts to mitigate of all risks out of the system could lead to a paralysed situation. The MEP considers CMU as a possibility for diversity, i.e. getting the right type of finance at the right stage of the company’s lifecycle. He underlined that risk taker investors should get a reward for taking the risk, but recently that is not always the case, the role of the banks therein should be examined. In relation to securitisation, he also mentioned that the European Parliament is working on a classification that could help individual investors to invest in SMEs.
Judith Hardt from the Swiss Finance Council highlighted the over-reliance on the banking sector and considered CMU as the first initiative when the European Commission really focuses on the investors. She warned the audience that despite the aim of contribution to growth, over-regulation could be counterproductive and the long-term impact of new legislation should be assessed. Focus should also be given on analysing how banks could better serve clients.
Under the panel on the increased role for capital markets, Mark Hutchinson from M&G Investments stressed the problematic nature of retaining rules in the AIFM Directive from the investor’s perspective. He believed that in the future ELTIFs could become available for the general retail investors as well. Alexandra Hachmeister from Deutsche Börse Group emphasised the importance of transparency (increased by CMU), but reminded to keep in mind that different data users (e.g. investors, regulators) have different transparency needs.
Juan Manuel Viver from BETTER FINANCE welcomed the fact that the Green Paper referred explicitly to the role of retail investors and the need for an adequate level of investor protection. Our Policy Officer underlined that in order to ensure an effective protection, national supervisors should further implement the already existing Single Rule Book. However, he stressed the missing reference to the encouragement of the presence of citizens in capital markets that was relevant for the benefit of companies with longer holding periods of equity. In his view, the latter could be achieved by direct equity holdings, which recently had become less popular than packaged products and cross-border holding of equities should not face any discrimination. The fact that the Green Paper addresses the revision of the shareholders’ rights directive and its implications for the CMU was also appreciated by Mr Viver. As a last point, the speaker emphasised the importance of financial education of private investors in order to improve the currently low levels of financial literacy of the population. Understanding of basic financial terms - such as the difference between a share and a bond or between interest and a dividend - is fundamental to be able to efficiently engage in financial markets and to take full advantage of the CMU.
The speeches and presentations of the conference can be found on QED's website.