The centrepiece of the European Commssion’s programme is the Capital Markets Union – a plan to make Europe’s economy less reliant on bank finance – particularly for small and medium-sized enterprises.
A Green Paper was launched by Jonathan Hill, European Commissioner for Financial Stability, Financial Services and Capital Markets Union in February 2015. Key proposals include:
- a programme to develop high-quality securitisation.
- a review of the Prospectus Directive with a view to making it easier for smaller firms to raise finance.
- improving the availability of credit information on SMEs for the benefit of potential investors, starting with workshops on this issue later this year. A simplified common accounting standard for companies listed on ‘certain trading venues’ is also proposed as a way of providing more information to potential investors.
- developing a pan-European private placement system – again, to encourage investment into SMEs; and
- promoting the take-up of new European Long-term Investment Funds (ELTIFs) to encourage investment into infrastructure and other long-term projects. Views are invited on how to boost take-up.
OUR RESPONSE strongly supports the EC’s vision of the ‘CMU’. Pension funds – and their members - have much to gain from a CMU that makes it easier to invest for the long term and across borders.
We argue that pension funds are – together with banks, fund managers and insurance companies – the EU’s key institutional investors and providers of capital. Our members have more than €1.1 trillion of assets invested across the global economy – including at least €400 billion across Europe. And, of course, much of the insurers long-term investment is drawn from pension funds.
It is essential that policies to develop the Capital Markets Union are seen through the prism of long-term institutional investors such as pension funds. Policy-makers should ensure that investment opportunities provided by governments or the EC offer the kind of risks and returns required by pension funds as they look to meet their liabilities to pay pensions.
European Commissioner Jonathan Hill is expected to publish an ‘action plan’ on the Capital Markets Union on 30 September. This will summarise responses to the CMU Green Paper and will explain how he plans to develop the CMU agenda in practice.