Capital Markets Union (CMU)

Capital Markets Union (CMU)

The Capital Markets Union (CMU) is a plan to create a Single Market for capital. The aim is to get money - investments and savings - flowing across the EU to benefit consumers, investors and companies, regardless of where they are located. A Green Paper on CMU was published in 2015, followed by a first Action Plan in September 2015.

After various follow-up measures - and stressing the real urgency due to the Covid-19 crisis - the European Commission published a new CMU Action Plan, “A Capital Markets Union for people and businesses-new action plan” in September 2020.This sets out 16 legislative and non-legislative measures to deliver on three main objectives:

  • to support a green, digital, inclusive and resilient economic recovery - with a focus on SMEs
  • to make the EU an even safer place to save and invest long-term
  • to integrate national capital markets into a genuine single market

The 16 actions include actions of importance for intermediaries, such as

  • increasing the quality of financial advice - The Commission will look into the feasibility of a pan-EU label for financial advisors
  • an assessment and review of the rules related to inducements, investment advice and information disclosure.

Regarding the latter, the Commission has started work on a retail investment strategy, to be presented in Q2 of 2022, and which should focus on the interests of individual investors.

An individual investor should benefit from: (i) adequate protection, (ii) bias-free advice and fair treatment, (iii) open markets with a variety of competitive and cost-efficient financial services and products, and (iv) transparent, comparable and understandable product information. EU legislation should be forward-looking and should reflect ongoing developments in digitalisation and sustainability, as well as the increasing need for retirement savings.”

In April 2021, the Commission published a Roadmap on its retail investment strategy and shortly after, in May, it launched a public consultation on the issue. The consultation contains 12 categories of questions, including on inducements and quality of advice; disclosure requirements; digital innovation; sustainable investing; redress; PRIIPs; financial literacy… With the help of consultants, the Commission is also preparing a study to feed into the strategy. BIPAR and its members are providing feedback in these processes.

Just before the new Action Plan came out, the European Parliament issued an “own initiative report” (not legally binding) on CMU. The report lists 7 key categories of importance: financing business; promoting long-term and cross-border investments and financial products; market architecture; retail investors; financial education; digitalisation and data; and the EU’s role in global markets.

Regarding retail investors, Parliament calls, amongst others, on the Commission to adopt a more horizontal and harmonised approach to consumer and investor protection. Parliament also calls for amendments to legislation to ensure access to independent advice by financial intermediaries without undue promotion of the financial products manufactured 'inhouse', and with a thorough assessment of products from a range of manufacturers, and to ensure a fair and transparent marketing of financial products.

Parliament notes that ESMA has adopted a nuanced view on a potential ban on inducements, and calls on the Commission to explore alternative approaches, with similar effects on aligning interests across the entire distribution chain. It agrees that the role of inducements in intermediation and distribution should be further examined to ensure that no conflicts of interest arise and that financial advice is fairly, transparently and adequately supplied to investors.

In December 2020, Council defined its priorities for future new legislation in relation to the New CMU Action Plan.Highest priority for Council are actions to improve funding of the economy, particularly of SMEs and in the Covid context. Mobilising private capital comes next.Council calls to enhance financial literacy; streamline existing disclosure rules; and assess quality and fairness of investment advice.

BIPAR always stressed the need for the EU to focus on initiatives that reduce administrative burden for (small) firms; to avoid overregulation; and that there is a need for stability and supervision must be tailored for the sector.

The Commission has now started working on the implementation of the new Action Plan.

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