Brussels, 17/09/2015 (Agence Europe) - On Wednesday 30 September, EU Financial Services Commissioner Jonathan Hill will unveil the European Commission's action plan on introducing a Capital Market Union (CMU) by 2019.
The crisis has highlighted the damage that can be done by excessive reliance on bank intermediary financing due to the reduction of lending, explained Niall Bohan, head of the CMU unit at the European Commission, at the annual conference of the European Banking Federation on Thursday 17 September.
Based on the results of the consultation that began with the publication of a Green Paper (see EUROPE 11256), the action plan to be published by the Commission at the end of the month will be ambitious, promised Hill. It will list areas to be worked upon to facilitate the financing of companies through non-bank means, such as access to the money markets or private investment. Bohan said that long-term investment in infrastructure would be promoted, as would crowd funding. In response to a question from EUROPE, the director of the European network of crowd funding companies, Oliver Gajda, doubted that the Commission would be able to deal with this new form of retail investment.
Securitisation. At the end of September, the European Commission will unveil draft legislation to breathe new life into securitised financial markets. Criticised for its role in the subprime mortgage market crisis, securitisation is a way of repackaging consumer loans and mortgages and selling them off as financial securities. It boosts liquidity and risk diversification, and allows banks to shift debt from their balance sheets and therefore benefit from reduced capital requirements. In theory, this could boost the flow of capital to the real economy.
“Our aim is to revive markets on a more sustainable basis, so that simple, transparent and standardised securitisation can act as an effective funding channel to the economy. To do this we propose to introduce a set of criteria that securitisation instruments will have to comply with to be counted as simple, transparent and standardised, and thus to qualify for a more appropriate capital treatment” (see EUROPE 11387), said the commissioner on Thursday.
On behalf of Finance Watch, which defends the public interest on financial matters, Christophe Nijdam criticised the splitting of securitised financial products into debt of differing seniority, wanting investors to keep some of the risk at all levels of splitting (see EUROPE 11246). He says that synthetic securitisation (selling fire-insurance to your neighbour for financial gain, he said) should not be covered by the draft. Commissioner Hill himself ruled out synthetic securitisation last week. (Mathieu Bion)