The Capital Markets Union (CMU) should boost the efficient allocation of savings to fund businesses, protect cross-border investors and create a new channel to finance the real economy, said economic and monetary MEPs in a resolution on Tuesday. They want CMU building blocks such as diverse investment choices, risk mitigation and clear investment information across the EU to be in place by 2018 to complement bank financing
The economic and monetary affairs committee want to see a balanced approach under the CMU in Europe. It believes that reliable non-bank sources of finance should be further developed alongside well-established bank financing. EU businesses will be less vulnerable in the event of tighter bank lending if market participants are able to raise debt, equity and venture capital directly from the market, says the committee.
Investors must be protected and informed
The committee stresses that for the CMU to function smoothly, the need for effective cross-border insolvency rules should be addressed and calls for the establishment of a recovery and resolution framework for non-banks, in particular central counterparties, i.e. intermediaries between buyers and sellers, that manage the risk arising when one of the investment parties defaults on a deal.
High-quality, easily comparable financial information on the companies seeking crowd funding or peer-to-peer lending should be available across borders, say the MEPs. They underline the need for financial education for SMEs and for retail investors to help them to avoid risky investments and give them more information about the range of products on the market, such as equity or corporate bonds.
Priority for EU SMEs
In order not to exclude SMEs from the financial markets, there should be SME-friendly regulatory conditions and simplified procedures and the administrative burden should be proportionate. Member States should for example review rules for equity financing that are too burdensome for private companies
Possible changes and additions to the existing financial rules should aim at removing entry barriers for SMEs, improving access to finance for innovative companies and ensuring that prudential standards are proportionate to the risks that such companies may cause. MEPs believe that simple transparent and standardised securitisation may be useful for some SMEs. They also note that being a highly diverse group, SMEs should have access to various instruments to improve financing.
Finally, the committee stresses that the launch of the CMU, with the underlying legislation as well as a certain degree of standardization in the financial markets, should be carried out in all member states in order to enable efficient capital flows across the EU.
Questions to the European Commission
On Tuesday, MEPs also voted on an oral question to the Commission concerning the CMU to be tabled at the plenary session in July. These will focus on: a genuine European approach to the CMU; SME-friendly regulatory conditions; and the proportionality, coherence and consistency of the future proposal.
Compliments of the European Parliament