Capital Markets Union (CMU)

Capital Markets Union (CMU)

The European Union defines the CMU as “ways of reducing fragmentation in financial markets, diversifying financing sources, strengthening cross border capital flows and improving access to finance for businesses, particularly SMEs”. A Green Paper was published in February 2015 in this respect, followed by an Action Plan in September 2015, a Mid-Term review in 2017 and a Communication to accelerate delivery in March 2018.

BIPAR’s response to the Green Paper referred to the need for the EU to focus on initiatives that reduce administrative burden for firms. BIPAR stated that, to remain competitive and attractive, the EU must avoid overregulation, that there is a need for stability and supervision must be tailored for the sector.

The CMU Action Plan of September 2015 consisted of a series of initiatives such as a legislative proposal for securisation or the Call for Evidence on the EU regulatory framework for financial services.

It was built around the following key principles:

  • Creating more opportunities for investors;
  • Connecting financing to the real economy;
  • Fostering a stronger and more resilient financial system;
  • Deepening financial integration and increasing competition.

In the mid-term review published in June 2017, the European Commission highlighted the fact that challenges have been evolving since the initial launch of the CMU Action Plan following, for instance, the UK vote on Brexit or the development of digitalisation in the financial services sector. In the Review, the Commission set out priority actions and legislative proposals on which the Commission wanted to move quickly (amongst which are the review of the prudential regime for investment firms and the PEPP proposal).

With the 2018 Communication: “Completing the Capital Markets Union by 2019 - time to accelerate delivery”, the Commission stated that it is committed to putting in place all building blocks of the Capital Markets Union by mid-2019. Together with the Communication, the Commission launched proposals on covered bonds; on facilitating cross-border distribution of investment funds; on cross-border assignment of claims and communication on the law applicable to securities and on crowdfunding. The Commission also launched Action Plans on Sustainable Finance and on Fintech.

Call for evidence on financial services regulation

In 2015, as part of the CMU project, the European Commission launched a “Call for evidence regarding the EU regulatory framework for financial services”. This Call for evidence aimed to assess the interaction between the individual rules and their combined economic impact, and addressed unintended consequences, inconsistencies and gaps in the regulatory framework.

BIPAR responded to the Call for evidence consultation, amongst others:

  • calling for a pause in regulation and stating that for many pieces of EU legislation it was too early to make an assessment as they are still in the implementation phase,
  • criticising the new “flexible” legislative system with three levels, creating uncertainty about the future
  • pointing at goldplating by Member States and at the cost of regulation,
  • criticising the lack of proportionality, in particular for the SME intermediaries BIPAR represents,
  • providing examples of cumulation of legal requirements (e.g. demands and needs test and suitability/appropriateness).

In December 2017, the Commission published a second progress report on the Call for evidence. Among other issues, the second progress report:

  • provides an overview of the measures adopted until that date. According to the Commission those measures contribute to a regulatory framework that is more conducive to lending and investment; acknowledge the unique characteristics of smaller and less risky firms; aim to keep the compliance burden to a necessary minimum; make the regulatory framework more consistent and forward-looking,
  • provides detail on the commitment to perform an assessment of the reporting framework (see the Annual Report article on supervisory reporting in this respect)
  • confirms the Commission’s continued commitment to evidence-based policymaking.
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