Capital Markets Union

April 2017

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European Commission

New Working Group on Capital Markets Union for CESEE region – 7 March

The Vienna Initiative has agreed to establish a working group on the CMU. The purpose of the working group will be to promote the diversification of investment finance in the Central, Eastern and South-Eastern Europe (CESEE) region, mobilize the Vienna Initiative network to analyse structural obstacles and regulatory gaps impeding capital market development in the CESEE region, and identify solutions at the national and regional levels. One of the objectives of the Commission’s CMU project is to develop national and regional capital markets where they are currently falling behind other EU countries, and the new working group’s work will feed to this goal. The group will report with recommendations by the end of 2017.

The Vienna Initiative, for its part, is a private-public sector platform established during the most intense years of the global financial crisis of 2008/09. It provides a forum for securing adequate capital and liquidity support by Western banking groups for their affiliates in CESEE.

DG FISMA’s Olivier Guersent delivers speech on FinTech – 7 March

Olivier Guersent from European Commission’s DG FISMA has delivered a speech on FinTech, for the occasion of a Swiss Finance Council event. In his speech, Mr. Guersent provides an overview of what the Commission has been doing in the area in the past few months. With reference to the CMU project specifically, he confirms that the Commission is currently conducting a study on the potential impact of automated and online financial advice on investor protection. Depending on the study’s outcome, the Commission may consider EU-level action. He also spoke about crowdfunding, where the Commission is closely monitoring the development of local crowdfunding networks and practices, and again the Commission may in due time consider EU-level action in order to ensure regulatory convergence and appropriate investor protection.

Commission launches public consultation on the review of ESAs – 21 March

The European Commission has launched a long-awaited public consultation on the operations of the European Supervisory Authorities (ESAs), ahead of its planned reform of their role, funding and governance as announced in the CMU Action Plan. The main objectives of the consultation are to:

  • gather evidence on and evaluate the operations of the ESAs in order to assess whether they are delivering as expected considering their objectives
  • build a clearer overview of areas where the effectiveness and efficiency of the ESAs can be strengthened and improved

The results of the consultation will provide the Commission with a basis for concrete and coherent action by way of a legislative initiative, if required. The consultation consists of four sections: (1) tasks and powers of the ESAs, (2) governance of the ESAs, (3) supervisory architecture and (4) funding. Some of the proposals include reinforcing the powers of the ESAs in certain areas, converging their roles and responsibilities, and making them more dependent on funding from the private sector.

As was the case with the CMU mid-term review consultation, the Commission has only given two months to respond. The deadline for providing comments is 16 May. The Commission argues that the issues with ESAs are widely known amongst the stakeholders, and there is consequently no need for a longer consultation period.

Commission launches public consultation on FinTech – 23 March

The European Commission has also launched a public consultation on FinTech. The consultation seeks stakeholder input to further develop and inform the Commission’s policy approach towards technological innovation in financial services, in particular on:

  • new technologies’ impact on the European financial services sector, both from the perspective of providers and consumers of financial services
  • whether the current regulatory and supervisory framework fosters technological innovation and how this could be further improved

The FinTech agenda combines the CMU’s alternative sources of financing dimension together with the technology agenda. Key topics in the consultation include FinTech contributing to access to finance, AI and automated financial advice, distributed ledger technology (DLT) – including its potential for financial reporting, cyber security, FinTech standardisation, potential for cost reductions and efficiency, a EU FinTechsandbox” (special regulatory framework), skillsets needed for a FinTech economy, as well as the potential role of regulators and supervisors – such as the European Supervisory Authorities (ESAs). The consultation is divided into four sections: (1) access to financial services, (2) reducing operational costs and increasing efficiency, (3) lowering barriers to entry, and (4) balancing data sharing and transparency with data security and protection. The deadline for responding to the consultation is 15 June.

Commission presents Action Plan for consumer financial services – 23 March

Finally and as part of an evidently lively month on the CMU side of things, the European Commission has published its Action Plan on consumer financial services. The Action Plan sets out further steps towards establishing a genuine technology-enabled Single Market for retail financial services where consumers can be better aware of and have access to the best deals, whilst being adequately protected. It is divided into three sections:

  • increase consumer trust and empower consumers
  • reduce legal and regulatory obstacles affecting businesses that provide financial services across borders
  • support the development of an innovative digital world to underpin a resilient Single Market for retail financial services

The Commission states that it will refrain from regulatory action when market dynamics could result in more integrated and competitive markets, but it stands ready to use competition rules for taking corrective action when required. Of particular interest, the Action Plan could have positive implications for the profession’s work in anti-money laundering (AML). It acknowledges that “one of the main benefits of FinTech in the short run is its potential for facilitating on-line relations with customers”. The Commission notes that innovators are developing new ways to identify and authenticate customers, e.g. by using remote identification to automate checks on companies, people, and ID documents to meet know-your-customer (KYC) requirements. The Commission does not intend to take any regulatory action beyond eIDAS and the current revision of the 4th Anti-Money Laundering Directive (which opens up to the use of electronic identification in KYC). Rather, it considers that Member States should decide how innovative digital tools for identifying customers can be used. Nonetheless, the Commission intends to set up a dedicated expert group to develop common guidelines.

The Action Plan as such is a non-legislative document, but it presents the Commission’s thinking on the areas covered, and provides an overview of the actions that the Commission intends to undertake in the upcoming year. A full list of these measures has been made available on the Commission website.


European Parliament

ECON Committee votes on its position to venture capital reform, negotiations with Council can start – 22 March

The ECON Committee of the European Parliament has voted on the Parliament’s position to the Commission’s proposed amendments to the venture capital framework (for additional details on the Commission proposal, please see Accountancy Europe’s CMU Policy Update from July 2016). The Parliament’s approach, notably, provides for a more flexible definition of SMEs on which the funds may invest – the Parliament text increases the number of employees to 499 (from the Commission’s proposed 250) for qualifying portfolio undertakings. The Parliament, moreover, proposes a minimum entry ticket for non-professional investors to be established at €50,000 for social entrepreneurship funds (EuSEF) – in contrast to the €100,000 proposed by the Commission. The European Parliament also calls for a bolstered role for the European Securities and Markets Authority (ESMA). The European Parliament will now enter negotiations with Member States in order to find a compromise – the agreement of both the Parliament and the Council is needed. This process will take several months.

European Parliament draft report on covered bonds published – 27 March

The European Parliament draft report on covered bonds has been published. The dossier is led by the MEP Bernd Lucke (EPP/GER). In the report, Mr. Lucke proposes to establish a EU Directive for covered bonds, based on the existence of collateral in the form of high quality assets of a long-lasting nature which are easily valued and repossessed (e.g. mortgages and government bonds), and of a legal and supervisory framework which guarantees dual recourse for the investor, the segregation of the cover pool and special public supervision. The Directive should define and distinguish between two types of assets: Covered Bonds (CBs) and European Secured Notes (ESNs).

in terms of next steps, a vote in the ECON Committee is currently scheduled for 19 June. In parallel, the Commission conducted back in September 2015 a public consultation on covered bonds, and is now considering follow-up action. It has also initiated a study looking into specific aspects of covered bonds. The European Parliament report is non-legislative and has no impact on the Commission or the Council. However, it will provide a basis for the European Parliament’s position in the context of a possible covered bond proposal in the future.



G20 leaders meet in Baden-Baden, discuss FinTech – 17/18 March

The G20 Finance Ministers have met in Baden-Baden in to discuss a number of common challenges and areas of concern. In the Communique of the meeting, the Ministers notably emphasise the important of identifying financial stability and regulatory risks linked to FinTech. The Ministers, moreover, emphasise the importance of enhancing financial literacy and consumer protection given the sophistication of financial markets and increased access to financial products in a digital world. These are in line with the work-flows that the European Commission is undertaking (see the European Commission-section above).


Other News

AFME report: The Shortage of Risk Capital for Europe’s High Growth Businesses – 7 March

The Association for Financial Markets in Europe (AFME) has published a new report on the shortage of risk capital for innovative start-ups in Europe. The report is the result of collaboration between AFME, the European Investment Fund (EIF), Accountancy Europe and other trade associations and four stock exchanges representing various stakeholders involved in pre-initial public offering (IPO) finance. The report states that Europe has a shortage of risk capital for small, early-stage growing businesses. This is holding back the development of high-growth sectors such as technology which are essential for economic competitiveness. While sources of capital such as crowdfunding and business angels are becoming more accessible, the EU is still at a significant disadvantage to the United States. A number of recommendations are put forward to improve this status quo.

SMEs lack support in EU financial plan – 24 March

Jean Comte writes in his EU Observer article that SMEs are unlikely to benefit as much from the CMU as claimed by the European Commission. The article interviews a number of stakeholders and policy-makers who each express scepticism towards the potential of the CMU Action Plan to deliver for smaller companies. The measures so far are more likely to benefit digital start-ups, rather than the vast majority of SMEs ranging from local bakeries to design firms. for example, there is unlikely to be a market for securitised SME loans, whilst venture-capital is directed more towards a specific niche of fast-growing or technology start-ups. SME representatives in Brussels would wish to see the establishment of mechanisms through which SMEs with rejected bank credit applications could be made aware of alternative finance providers, and for banks to explain reasons for the rejection. Work in both areas is ongoing between SME and banking stakeholders at the EU-level.


MEP Questions & Answers

Sustainable finance – 22 March

The European Commission has replied to a question asked by the MEP Nicola Caputo (S&D/ITA) with regard to sustainable finance. In his question, Mr. Caputo asks the Commission how it plans to incorporate climate change issues into investment decisions and into policies on innovative products for banks, financial institutions and insurance companies. In his reply, Vice-President Dombrovskis emphasises the need for an effective EU strategy on sustainable finance. The Commission established its High-Level Expert Group (HLEG) on sustainable finance earlier this year, which should provide recommendations for a comprehensive EU strategy by the end of 2017. The HLEG will be looking at how the EU financial framework can be reformed to steer private capital towards sustainable investments while ensuring financial stability. The HLEG may also investigate how to incorporate environmental risks into investment decisions and policies to support innovative products.



  • 11/04/2017, Public hearing on the capital markets union mid-term review, European Commission, Brussels. Source
  • 04-05/05/2017, EU Capital Markets Union: Latest Developments, ERA, Brussels. Source
  • 19/05/2017, European Financial Integration, European Commission and ECB, Brussels. Source
  • 20/06/2017, CMU review, Financial Future, Brussels. Source