Digital Single Market Policy
Energy and Climate Change Policy
Internal Market and Financial Services Policies
On September 30, the European Commission published its action plan on a Capital Markets Union. According to the Commission, the European capital market is currently too fragmented and underdeveloped in comparison to the U.S.. In order to address this issue and to facilitate funding for businesses, the plan outlines the following six goals:
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Improve financing for innovation, start-ups and non-listed companies. The Commission proposes to promote the development of alternative funding channels for small and medium-sized enterprises (SMEs). It therefore intends to adopt a series of measures that will increase non-bank finance options for SMEs. Among others, the Commission will monitor and support evolutions in the crowdfunding sector and amend the Regulation on European Venture Capital Funds (EuVECA) as well as the Regulation on European Social Entrepreneurship Funds (EuSEF) to unlock more venture capital, streamline information requirements on credit data for SMEs, and promote direct loans from large institutional investors to mid-sized firms. |
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Make it easier for companies to enter and raise capital on public markets. The Commission proposes to modernize the Prospectus Directive with the aim of simplifying the regulatory regime for SMEs to draw up a prospectus and access capital markets. Further, the Commission will review all other regulatory barriers to public markets for SMEs in order to limit the administrative burden. In addition, the Commission will monitor the liquidity of the secondary corporate bond markets and propose measures, if necessary, to prevent the higher borrowing costs associated with illiquidity. |
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Stimulate the environment for long term infrastructure and sustainable investment. The Commission would like to anticipate the coming into force of the European Long Term Investment Fund Regulation (ELTIF) on December 9, 2015, by agreeing on a definition for infrastructure investment. This definition would prescribe the regulatory capital required to be held against an infrastructure investment, creating a new predictable asset class that is easy for investors to trade and invest in. To this end, the Commission will review the Capital Requirements Regulation (CRR) and the Directive on the business of Insurance and Reinsurance (“Solvency II”) to calibrate the regulatory capital required for infrastructure investment. Further, the Commission will review the cumulative impact of the legislation adopted in response to the financial crisis. The review aims to address the overall coherence of existing EU financial legislation. |
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Foster retail and institutional investment. According to the Commission, the markets for retail financial services and for institutional investments are too fragmented along national boundaries. Consequently, it will assess the potential of further policy initiatives in the near future. A particular concern is the market for personal pensions, where currently a patchwork of European and national rules apply. As a result, the Commission is considering a regulatory template for pension products that providers could choose to use when offering pension products. |
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Leverage banking capacity to support the wider economy. In order to improve the lending of banks to the real economy, the Commission envisages three important measures. First, it proposes a new EU framework for simple, transparent and standardized (STS) securitization, which shall kick-start the securitization market in Europe. Second, the Commission launched a consultation on the development of a pan-European framework for covered bonds—a more integrated market for covered bonds has the potential to reduce the cost of funding for banks and liberate capital for investments in the wider economy. Third, the Commission is considering allowing credit unions to operate outside the EU’s capital requirements framework for banks. |
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Facilitate cross-border investing. Finally, the Commission proposes tackling long-standing barriers to cross-border investment in the EU. Among others, the Commission would like to eliminate legal uncertainty regarding the ownership of securities and the applicability of national laws to third party effects caused by the transfer of claims. Further, the Commission intends to promote convergence on tax legislation, insolvency procedures and financial supervision among Member States with a mix of recommendations, guidelines, best practices and codes of conduct. |
The range of initiatives that the Commission envisages will be accompanied by the necessary stakeholder consultations and impact assessments. The implementation for most measures will start in 2016.
The European Securities and Markets Authority (ESMA) has now published the long-awaited Final Report on its draft Implementing Technical Standards (ITS) and draft Regulatory Technical Standards (RTS) under the MiFID II Directive and the Markets in Financial Instruments Regulation (MiFIR) – see here. Published on September 28, 2015, the Final Report follows ESMA’s consultation on the draft technical standards in December 2014 and February 2015. The Final Report details ESMA’s final proposals in relation to 28 draft Technical Standards and attaches those draft Technical Standards in an Annex. The Final Report also discusses the feedback received by ESMA and ESMA’s rationale in making the final proposals, and includes a cost-benefit analysis.
The Final Report and draft RTS and ITS contain ESMA’s proposals on the following areas:
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Alongside the publication on September 28, 2015 of the ITS and RTS on MiFID II, ESMA has published a Final Report containing draft technical standards (i.e. regulatory technical standards (RTS) and implementing technical standards (ITS)) on the Market Abuse Regulation (MAR) – see here. The final report covers the nine areas on which the European Commission gave mandates to ESMA to develop RTS and ITS. These include requirements on market participants conducting market soundings, requirements to report suspicious orders and transactions, rules for public disclosure of insider information and the delay of such publication, specific arrangements on how to present investment recommendations and specific formats for establishing insider lists, and the notification and disclosure of managers' transactions. ESMA has now sent the final report to the European Commission, which has three months in which to decide whether or not to endorse the draft RTS and ITS. Assuming that the European Commission endorses ESMA’s draft recommendations, the Council of the European Union and the European Parliament then have a period of time in which they can raise any objections.