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Capital Markets Union

An action plan for stronger capital markets

On 30 September 2015, the European Commission published its action plan for Capital Markets Union (CMU). This action plan is about strengthening Europe’s capital markets to boost levels of private investment and to support alternatives forms of finance for businesses to complement bank lending.


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On 30 September the European Commission published its action plan for Capital Markets Union (CMU), the first substantive set of proposals from Commissioner Hill’s new unit responsible for financial stability, financial services and capital markets (DG FISMA).

CMU is about strengthening Europe’s capital markets to boost levels of private investment and to support alternatives forms of finance for businesses to complement bank lending.

Why is this important?

The drivers for change highlighted by the Commission include: small and medium sized enterprises (SMEs) in the US are five times more likely to receive funding from capital markets than those in the EU; €100 billion of additional bank lending would be available if securitisation markets were able to return safely to pre-crisis levels; €200 billion of investment is required per year to meet low-carbon economy targets across the EU.

How will it work?

The action plan builds on a Green Paper from earlier this year when the Commission asked for comments and ideas on its initial objectives and approach. The Commission received over 700 responses (read KPMG’s response here (PDF 285KB)), almost all of them supportive and positive, in particular for the Commission’s preference to mix legislation with market-led initiatives.

What are the priorities?

  • Providing more funding options for Europe’s businesses and SMEs – revise prospectuses, support for venture capital and private equity, promote alternative forms of finance, connecting SMEs with funding options.
  • Appropriate regulatory environment for long term investments and infrastructure – recalibrate Solvency II, cumulative impact assessment of existing regulation.
  • More choice for investors – boost choice in retail financial services, improve the quality and availability of investment advice, build an EU market for private pensions, strengthen fund passports to increase choice.
  • Increasing bank lending capacity – revitalise securitisations, incentives for credit unions, pan-European covered bonds framework.
  • Breaking down cross-border barriers – insolvency and securities ownership, securities clearing and settlement, supervisory convergence.

The Commission plans to review progress in 2017 and aims to have the core building blocks for CMU in place by 2019. Seeming to address criticism of not moving swiftly enough the Commission published several of the planned proposals and consultations at the same time as the action plan – including securitisations, Solvency II calibration, venture capital, covered bonds, and cumulative impact assessment. For some critics this will still not be ambitious enough and there will be pressure on the Commission to push strongly ahead with key elements of the plan which could have most benefit to economic recovery – such as securitisations, Prospectus directive, recalibrations of Solvency II and Capital Requirements Regulation (CRR), and fixing rules that limit the ability of investors to invest cross border.

Overall, KPMG believes that this action plan sets the right level of ambition and given the deserved level of support by industry and other legislators will go a long way to helping Europe create a more dynamic and successful capital market. Many will say that detail is lacking from the Commission but within the 33 action areas (PDF 298KB) is the potential to change some fundamental limitations on Europe’s economic growth and expand the commercial opportunities for many sectors of Europe’s economy. Europe must be outward looking when it builds its capital markets and must move quickly – speed is of the essence to maintain momentum and enthusiasm for change.

KPMG EMA's response to the CMU Green paper emphasised the challenge Europe has around the capture, presentation, validation and accessibility of high quality reliable data. Despite several references throughout the action plan to data and information we still believe more needs to be done to understand the information needs, existing barriers and potential solutions (especially from technology) for investee and investor companies. Maybe through collaboration with other parts of the European Commission a ‘Capital Markets Data Initiative’ could be established to create a dialogue between stakeholders and environment for industry-led solutions on issues such as SME data and financial reporting could be discussed.

<p>© 2018 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.</p>

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