With the United Kingdom, the largest financial marketplace in Europe, officially asking, at the end of March, to leave the European Union, the European Commission hopes to rejig the Capital Market Union (CMU) project to stimulate the raising of private capital in the rest of the EU.
“London has traditionally pooled and managed liquidity from across Europe (…). The prospect of Europe's largest financial centre leaving the single market thus makes our task more challenging, but all the more important”, the European Commissioner for Financial Services, Valdis Dombrovskis, told a public hearing on the mid-term revision of the CMU project on Tuesday 11 April.
Calling for redoubled efforts to stimulate the emergence of capital markets that are able to complement bank lending, the Commissioner listed the sectors in which the UK has a 70% market share and to which particular attention must be paid; trading in and regulation of derivatives, management of alternative investment funds such as hedge funds.
Changes to the planned CMU between 27 member states raises the question of the fitness for purpose of Europe's financial supervision institutional architecture. This could be the opportunity to consider targeted changes to the powers of the European Securities and Market Authority (ESMA), Dombrovskis said.
Facilitating the cross-border passporting of funds
The Commission is also looking at changing the European rules on 'UCITS' funds and alternative investment funds to increase cross-border passporting, for instance by reducing passporting costs.
“I may ask my services to work on a legislative proposal to address remaining sources of friction to cross-border passporting of funds. Often, these frictions have their origin in residual host country arrangements, which are not addressed in EU legislation”, Dombrovskis said.
Lastly, the Commissioner expressed approval of the European work to direct flows of capital into projects to support environmental protection. An expert group will make specific recommendations by the end of the year, with an interim report expected this summer (see EUROPE 11695). (Original version in French by Mathieu Bion)