The European Commission has revealed it would be rebooting its Capital Markets Union (CMU) plan. The Commission hopes it will strengthen Europe’s financial systems at a time when Brexit is looming over the continent.
The CMU was originally adopted in 2015 with the aim of helping businesses access investment across European border. There were 33 measures in the original plan, which helped establish the building blocks of an integrated capital market. The plan was spearheaded by the Commission’s president Jean-Claude Juncker often called the Juncker Plan. Now the Commission has published a mid-term review of the plan and it has vowed to refresh the plan.
What does the Commission hope to achieve with a renewed plan?
The Commission’s broad aim is to strengthen cross-border cooperation, as well as the powers regulators have to boost capital markets. There have been 20 measures from the original list, which have already been achieved. The securitisation package just recently helped free bank’s balance sheets. Venture capital reforms have also been on the agenda and in May, the European Parliament and Council agreed in principle on related measures that would boost SMEs access to investment.
For the rebooted version, the focus is on SMEs and their ability to access financing. The Commission hopes to oblige national governments and markets to signpost funding options and harmonise the regulations surrounding cross-border investment. Among these is the effort to create a Pan-European Personal Pension Product (PEPP) and to start a legislative process for EU-framework for covered bonds. Overall, nine new elements have been added to the CMU during the mid-term review.
Vice-President for the Euro and Social Dialogue and the person in charge of Financial Stability, Financial Services and the Capital Markets Union, Valdis Dombrovskis, said the new reboot is necessary for the current climate. “As we face the departure of the largest EU financial centre, we are committed to stepping up our efforts to further strengthen and integrate the EU capital markets,” Dombrovskis said.
Reducing barriers – not just for capital but also innovation
While the objective of the CMU plan is to reduce barriers for capital flow across the European borders, there is also an effort to ensure innovation doesn’t concentrate in just a single spot. A big part of the reviewed plan is a proposal to look at fintech and more specifically, to consider if you could create a dedicated EU licencing and passporting framework for the fintech sector. This could allow firms in the wider European Economic Area have the opportunity to operate without restrictions across Europe – it would also possibly include the UK, post-Brexit.
By the last quarter of 2017, the Commission also wants to decrease the cost of operating in fintech and provide new solutions for fintech firms in terms of financing. The overall objective is, therefore, to ensure capital markets in the continent have a much wider reach in a variety of sectors.
The hope is to ensure that in the future, innovation and capital are able to flow more freely across the European countries. Dombrovskis said, “We need to break down barriers, more than ever.”