FEE CMU Policy Update

December 2016

European Commission


European Commission sets up an internal Task Force on Financial Technology – 14 November

The European Commission will establish a so-called Financial Technology Task Force (FTTF) – an internal working group with the purpose of monitoring fintech developments and putting forward recommendations for a regulatory framework that supports innovation whilst ensuring financial stability and consumer confidence. FTTF will be co-chaired by DG FISMA and DG CONNECT, and brings together services responsible for financial regulation and the Digital Single Market, along with other Commission officials dealing with competition and consumer protection policy. It will further engage outside experts and stakeholders with the aim to formulate “policy-oriented recommendations” and propose measures in the course of 2017.


Commission launches insolvency proposal to give companies a second chance – 22 November

The European Commission launched its expected proposal on business insolvency. All measures are proposed as minimum requirements. The Directive has three distinct main parts: preventive restructuring frameworks (Title II), second chance for entrepreneurs (Title III) and measures to raise the efficiency of restructuring, insolvency and second chance (Title IV). Titles I, IV, V and VI are horizontal in scope. Although the provisions in Title III are restricted to entrepreneurs, it is explicitly stated that Member States may extend those provisions to all natural persons to ensure consistent treatment of personal debt. In terms of next steps, the Directive will now be considered separately by both the European Parliament and the Council. After each of the two has finalized their respective positions on the proposal, they will engage in ‘trilogues’ in order to find a mutually agreeable compromise. This process will take months at best, but depending on the difficulty and political sensitivities of a subject matter (which is definitely the case for harmonization of insolvency rules), the process may be even lengthier.


Commission launches the Start-up and Scale-up Initiative, tax a main concern for small companies – 22 November

The European Commission has launched its Start-up and Scale-up Initiative. This predominantly repackaging/reframing exercise of already existing work flows presents a number of initiatives that should tackle three issues that prevent start-ups from scaling up: (i) regulatory and administrative barriers; (ii) the shortage of partners and opportunities; and (iii) difficulties in access to finance. The main suggestions to remove barriers draw on existing initiatives such as the Single Digital Gateway, a simplification of tax filings (Common Consolidated Corporate Tax Base, simplification of the VAT system), and a proposal to further harmonise EU insolvency legislation. The Commission will also start providing recommendations to Member States to help them improve policy design. Looking at the European Semester exercise, it remains to be seen whether this will have a big impact. The Commission also highlights its venture capital fund-of-funds as a main initiative to improve access to finance for innovative small companies.


Commission publishes follow-up Communication to its Call for Evidence – 23 November

As part of the CMU Action Plan, the European Commission launched at the end of last year a consultation on financial services legislation, titled the Call for Evidence, with the purpose of assessing whether financial sector legislation enacted in past years has put disproportionate burdens on markets actors, led to mismatches in legal requirements or caused unintended consequences. As a follow-up to the consultation, the Commission has now published a Communication that outlines follow-up action that it intends to undertake in order to address inconsistencies, duplications and burdensome requirements in the EU legal framework as identified by the various stakeholders that responded to the consultation. Of particular interest, the Commission will review and consult on the national options in the Audit Regulation with a specific focus on the cross-border impact of mandatory rotation and the blacklist of prohibited non-audit services. Moreover, the regulatory environment for financial technologies, various reporting requirements and their potential overlaps, and gold-plating by Member States will also be under close Commission scrutiny. In terms of next steps, the Commission will monitor progress in the implementation of the respective announced areas, and will publish its findings as well as potential further steps before the end of 2017.



European Parliament


ECON Committee hearing with Commission Vice-President Valdis Dombrovskis – 9 November

The ECON Committee of the European Parliament has held a public hearing with the Commission Vice-President Valdis Dombrovskis to discuss economic challenges ahead for the EU, as well as progress on key hot topics such as the CMU. In his opening statement, the Vice-President referred to the follow-up CMU Communication that the European Commission published earlier in September (see FEE CMU Policy Update from September 2016 for further details), and urged for a faster pace for the CMU reforms. He spoke about the Commission’s recent insolvency proposal (see article above), the expected Code of Conduct to simplify the reclaiming of withholding taxes across the EU, personal pensions legislation as well as the Strategy on Green Finance expected for next year, as well as ensuring that retail investors have a better environment with reduced burdens for purchasing consumer financial services across Europe and making it easier for consumers to compare products. Finally, the Vice-President referred to the results of the Commission’s Call for Evidence exercise (see article above), and emphasised the need to streamline reporting requirements and make them less burdensome especially for SMEs.

Several MEPs then took the floor to ask specific questions on relevant issues. Of particular interest, Enrique Calvet Chambon (ALDE/SPA) and Neena Gill (S&D/UK) asked about the possible impact of Brexit on the CMU agenda, to which the Vice-President replied that the prospective retreat of the largest capital market in the EU from the Single Market makes the case for integrated capital markets in the rest of the block even stronger, and as a consequence the Commission is now even more committed to the CMU project.







Plenary votes on retail financial services – 22 November

The European Parliament Plenary has voted on its report on retail financial services, drafted by the MEP Olle Ludvigsson (S&D/SWE). The vote passed with 552 votes in favour, 128 against and 11 abstentions. The final report calls, in particular, to simplify legislation in order to make products more easily comparable across Member States and especially in the insurance sector, to maintain a level playing field between stakeholders (new as well as incumbent ones) with rules that are as neutral as possible with regard to technologies and business models, reinforcing consumer trust in financial products with high currency exchange risks, and to identify the risks and opportunities of digitalisation – including ensuring that the use of personal and big data by financial services providers complies with EU data protection legislation and is strictly limited to what is necessary for the provision of a service. The report is non-legislative and commits neither the Commission or Member States to action. Having said that, the Commission is expected to put forward concrete proposals to enhance the provision of and trust in retail financial services as a part of the CMU project, and the Parliament will draw on the positions in this report to formulate its future negotiating stances in relevant legislative processes.





“Maltese finance minister talks Brexit, tax and capital markets” – 20 November

The Finance Minister of Malta, Edward Scicluna, has given an interview to Politico in which he sheds more light on the prospective priorities of the upcoming Maltese Presidency. In the interview, the Minister notably states his disappointment with the ambition in the European Commission’s CMU project, stating that what is currently in the Action Plan “is not so impressive”. He nevertheless maintains that CMU will be a priority for the Presidency running until June next year.





ESMA seeking financial innovation experts for Stakeholder Panel – 8 November

The European Securities and Markets Authority (ESMA) has launched a call for expressions of interest to join its Consultative Working Group (CWG), which advices ESMA’s Financial Innovation Standing Committee (FISC). The main purpose of FISC is to help ensure that supervisors, policy makers and market participants are aware of innovations that may undermine investor protection, give rise to financial instability or threaten market integrity. Stakeholders as part of the CWG feed directly into FISC’s work in this area. Interested stakeholders are asked to submit their application at latest by 31 December 2016, for a mandate running from January 2017 until December 2018.








ESMA response to the Commission consultation on a potential EU personal pension framework – 10 November

The European Securities and Markets Authority (ESMA) has published its response to the European Commission’s public consultation on the establishment of a EU framework for personal pensions (for further details on the consultation, see FEE CMU Policy Update from July 2016). Of particular interest, ESMA maintains that the nature, frequency and content of disclosures should be one of the key elements of a potential EU framework for personal pension products, but maintains that overall disclosures (in particular on risks, rewards and costs) should be as close as possible with existing disclosure rules (such as the ones that currently exist under PRIIPs framework).


ESMA’s Steven Maijoor: Safeguarding investors is key to ensuring the Capital Markets Union’s success – 17 November

Steven Maijoor, Chair of the European Securities and Markets Authority (ESMA), has delivered a speech at a MiFID conference in Germany on the need for strong investor protection in the context of the CMU. Although his speech very much focuses on MiFID, Mr. Maijoor maintains overall that stronger investor protection is not in contradiction with the goals of the CMU, some of which relate to easing administrative and disclosure burdens on companies.



Other News


AFME report: The benefits of capital markets to high-potential EU economies – 15 November

The Association for Financial Markets in Europe (AFME) has published a report on the potential and benefits of, as well as reforms undertaken towards stronger and better integrated capital markets in Eastern Europe. It puts forward a set of recommendations to improve the current status quo, including allowing pension funds or insurance companies to invest in a wider variety of assets (e.g. venture capital, real estate funds etc.), further diversifying sources of financing for growth companies at pre-IPO stage, and simplifying tax systems.


November Insight – Sustainable investment: the success in statistics – 28 November

An article by Valentina Neri on the prospects of sustainable investment has been published on the website of Eurosif (European association promoting “sustainable and responsible” investment). On the basis of data gathered by Eurosif, the article argues that there is a paradigm shift from considering sustainable investment as small-scale and even naïve to seeing it as a resilient and credible trend. It describes recent trends in a number of areas under the umbrella of sustainable investment, including green bonds, the increasing interest of retail investors in sustainable investment, and investments into green and sustainable technologies and energy.










PCAOB White Paper on Characteristics of Emerging Growth Companies – 30 November

The Public Company Accounting Oversight Board (PCAOB) has published a White Paper on the characteristics of emerging growth companies (EGCs). The paper aims to identify certain common characteristics of EGCs, on the basis of data gathered from the US Securities and Exchange Commission (SEC). The date reveals, notably, that there were 684 EGC filers (or 35%) that have common equity securities listed on a U.S. national securities exchange. These EGC filers represented 14% of the 4,867 exchange-listed companies and approximately 1% of total market capitalization of exchange-listed companies. Moreover, approximately 51% of EGC filers, including 74% of those that were not exchange-listed, received an explanatory paragraph in their most recent auditor’s report expressing substantial doubt about the company’s ability to continue as a going concern.



Event reports


FEE co-organises event on SME prospectus as part of the Invest Week – 29 November

The Federation of European Accountants (FEE) organised together with the Association for Financial Markets in Europe (AFME), European Issuers and the Federation of European Stock Exchanges (FESE) a breakfast roundtable event on SME prospectuses. The event brought together as speakers Tilman Lueder (DG FISMA, European Commission), the MEP Kay Swinburne (ECR/UK) as well as Ronan Dunne (ESMA) as well as representatives from each of the four co-organising associations.

The panelists examined the current status and potential improvements of the Prospectus Regulation, and what has been achieved, taking into account key policies of European legislators such as the reinvigoration of available funding for SMEs. Many of the policymakers and industry representatives at the debate expressed frustration with the dilution of ambitious initial objectives in the first opportunity from the CMU initiative during the final level 1 negotiations expected to end by the end of 2016 (according to optimistic estimations). The prospectus event was a part of the Invest Week initiative organised by Invest Europe together with 25 other organisations with a stake in the Commission’s CMU project.