Experts pointed out the obstacles to the capital markets union in the European Union (see EUROPE 12928/29), at a conference organised on Wednesday 1 June by the European Commission’s Financial Services Department (DG FISMA).
Neil Rimer, General Partner and co-founder of Index Ventures, spoke about the fragmentation and small size of the market in Europe. “I would say that the capital markets, even if they remain fragmented in Europe, are still relatively small compared to other market products in the world. Banks remain at the heart of the financial sector, and lead markets are divided along national lines”, he noted.
Paolo Gentiloni, European Commissioner for the Economy, recalled that in the United States, non-financial companies are financed by negotiable instruments to the tune of about two-thirds, compared with one-third in Europe, where companies are much more dependent on bank loans.
According to Mr Rimer, the lack of transparency between countries at the tax level is also a problem, which must be addressed through the quality of regulation in the Member States. Finally, he highlighted the fragmentation of insolvency regimes at national level. “Insolvency and debt enforcement procedures are one of the main factors explaining the differentiation of financing costs for companies”, he said.
The European Commissioner for Financial Services, Mairead McGuinness, acknowledged that “today we are not unleashing the full power of finance because we do not have deep, liquid and integrated capital markets”. “Completing the capital markets union will make Europe stronger on the global stage, a top priority for the EU”, she added.
For Robyn Laidlaw, head of distribution at Vanguard Europe, there are solutions, including financial education and financial industry jargon that are “keys to making the capital markets more accessible to retail investors”. “I think all these problems are addressable, if we really break down the problem and think about it for retail investors”, she added.
Mrs McGuinness listed the European Commission’s next initiatives that will contribute to the implementation of the capital markets union: - an initiative to harmonise corporate insolvency procedures in the autumn; - a legislative initiative that will improve companies’ access to capital by facilitating the listing of securities; - a legislative package to make EU-based CCPs even safer and more attractive, expected before the end of the year.
She also mentioned a strategy for retail investment next year.
However, John Barragan, the Director General of DG FISMA, concluded the discussions as follows: “There is no silver bullet or single measure that will deliver the capital markets union. It needs a lot of patience and a lot of perseverance”. (Original version in French by Anne Damiani)