Having to comply with stricter regulatory capital requirements, banks are not lending out as much as they used to. Therefore potential alternative sources for badly needed investment in the real economy are being investigated. The most promising option on the table ‒ or at least the one that the EU regulators are now exploring ‒ is market-based lending.
The legislative projects already lying on the legislators' desks include proposals on money market funds, benchmarks and securities financing transactions. Apart from that, a revision of Undertakings for Collective Investment in Transferable Securities (UCITS) is also lurking in the background.
Besides these existing proposals, the Commission is going to start looking into facilitating long-term investment by, amongst others, simplifying the EU debt market: more liquid, transparent and standardized on paper, but still completely fragmented in reality, the new regulation is supposed to change this around.
Finally, long-term investment is also expected to sprout from the insurance and pension sectors, which reportedly need to be “unblocked”. Now that the Commission has a new Directorate General for financial stability, financial services and capital markets union, this unblocking will hopefully be performed with steady hands and utmost caution.