Brussels, 27/08/2015 (Agence Europe) - Transforming the capital markets union project into a financing investment union is one of the ideas which would make it easier to fund corporate investments, according to an expert report submitted to the French government on Wednesday 26 August.
The capital markets union (CMU) project “brings with it solutions”, but it would have to be renamed “financing and investment union” for it to allow a “genuine diversification” of funding opportunities for businesses, said François Villeroy de Galhau, former head of the bank BNP Paribas who oversaw the drafting of the interim report, which will be finalised in the autumn.
The project, which is “imperative” for eurozone countries, should be reconciled “around 2016-2017” and “prioritised” in line with two expectations: - offering businesses “a continuum of debt instruments from the banks to the markets” through the development of private investments, direct loan platforms and tightened-up securitisation products ; - encouraging “riskier and longer-term investments” by changing the prudential rules for insurance ('Solvency II'), developing investment in cross-border own funds (e.g. European venture capital) and supporting European assets in favour of long-term infrastructure and the energy transition.
According to the report, the calendar for the CMU is “completely at odds” with that of the 'Juncker plan', which is designed to draw down €315 billion in additional investments between now and 2017 (see EUROPE 11364). “However, they quite clearly complement each other: the Juncker plan makes public money available in order to mobilise private capital, (whilst) the CMU favours the investment of private capital”, the report states.
Completing banking union. As the total freedom of circulation of banking flows between member states has not been re-established, the report recommends that banking union be completed in the eurozone by giving the Single Resolution Fund (SRF) sufficient resources to carry out its work, both during its build-up phase ('bridge financing') and post-2023 ('common backstop') and by pooling the national bank deposit guarantee funds at Community level. In particular, the report calls for the “prohibition of any additional national isolation measures”. Be it “regulatory, explicit or implicit”, this kind of “national 'portcullis' still seems to exist in many northern European countries: in the view of the national regulators, local savings should be used in the country of origin in full”, the report notes, adding that there is a “manifest breach of the monetary union”, which has lost all justification with banking union. He refers to the example of Bafin, the supervisor of the German financial markets, which banned flows within the Unicredit group from its German subsidiary HVB to the Italian parent company.
In general, the report notes that “corporate investment has ridden the crisis out better in France than elsewhere in Europe, and remains higher in that country”. The investment rate of non-financial companies in France was 23% in 2014, 21.5% in the eurozone and less than 22% in Germany. Nonetheless, corporate investment is growing in France more slowly than it is in Germany. Focusing more on construction than production and innovation, it is also reported to be “less satisfactory in terms of quality and productivity”. (Mathieu Bion)