FEE CMU Policy Update

June 2016

European Commission

White Paper consultation on ESAs to be expected for autumn

The Commission’s CMU Action Plan argues that deeper financial integration will need to be accompanied by an increased focus on achieving convergence of supervisory outcomes across the EU. With specific reference to the European Securities and Markets Authority (ESMA), the Action Plan states that the Commission will develop a strategy in order to further strengthen supervisory convergence, and to identify areas where a more integrated approach could improve the functioning of a CMU. To this end, the Commission will publish a White Paper on the governance and financing of the European Supervisory Authorities (ESAs). The White Paper is currently anticipated for September-October 2016 (postponed from initial plan of June-July), and will take the form of a consultation document. The Commission has expressed its intention to render the ESAs more dependent on private, industry-derived sources of funding. With regard to governance and mandate, the Commission is likely to increase the supervisory powers and authority of the ESAs so as to foster greater convergence and promote a better coordination in implementation between national supervisory authorities. What these elements entail in practice remains to be seen.

Public consultation on the main barriers to the cross-borders distribution of investment funds across the EU – 2 June

The European Commission has published its anticipated public consultation on the cross-border distribution of investment funds across the EU. The consultation in particular seeks for stakeholders’ input on marketing restrictions, distribution costs, regulatory fees, administrative arrangements, distribution networks, notification processes and taxation. In each of the areas, the Commission has identified severe obstacles that dis-incentivise the cross-border movement of investment funds. The deadline for responding to the consultation is 2 October.


Commission to incorporate European Supervisory Authorities into European Economic Area Agreement – 2 June

The European Commission intends to incorporate the European Supervisory Authorities (ESAs) into the EEA framework. According to the Commission, this will ensure “strong and coordinated financial supervision” in the EEA. The Parliament of Liechtenstein has already approved the arrangements, whilst Norway and Iceland are actively deliberating on the matter.


Remarks of Commissioner Jonathan Hill at the European Parliament’s Public Hearing on Securitisation – 13 June

Commissioner Hill has delivered a speech on securitisation at the European Parliament’s public hearing on the same topic. In his speech, Commissioner Hill notably highlights the importance of securitisation, arguing that it would on the one hand increase investments into the economy, whilst enabling banks to borrow more by easing the pressure on their balance sheets. He moreover re-iterates the Commission thinking on the concept of simple, transparent and standardised (STS) securities. Many MEPs have expressed caution and scepticism towards the Commission proposal, however, seeing securitisation as a recipe for potential financial instability.


Brexit camp wins the UK referendum, Commissioner Hill resigns – 23/25 June

To the shock of many, the Brexit side has won the British referendum on EU membership. As a next step, the next Prime Minister of the UK will have to invoke Article 50, which will trigger a two-year process of leaving the EU. The political implications of the looming Brexit can already be felt in the EU. Of specific interest to the CMU, Commissioner Hill has announced his resignation. His portfolio will be taken over by the Commission Vice-President Valdis Dombrovskis, for the time being. The resignation and re-appointment will enter into effect in mid-July. It remains to be seen to what degree Commissioner Dombrovskis and his possible successor alter the pace and “tone” of the CMU agenda – very much considered as Commissioner Hill’s flagship project.


“City to be sidelined by capital markets union plan” – 29 June

According to the Financial Times (article only available to subscribers), a number of Eurozone Member States see the Brexit as an opportunity for building a EU CMU. The article refers to “senior European officials”, according to whom Brexit for example removes a major obstacle for more centralized supervision of trading and clearing as desired notably by France and the European Central Bank (ECB). Indeed, whilst some analysts fear that the Brexit will cause the Commission’s CMU project to lose significant momentum, a number of high-level EU officials seem to maintain that, on the contrary, the CMU project may receive new life in a post-UK environment. The article quotes the MEP Sven Giegold (Greens-EFA/GER) according to whom the EU “needs harmonised insolvency, civil proceedings, contract and tax laws to better protect against and respond to future economic shocks. In this regard, the EU may be able to develop a true capital markets union more effectively without the UK.”



European Parliament

Prospectus Committee vote on 13 July, might go straight to trilogies

The European Parliament’s draft report on the Prospectus Regulation will be voted on by the ECON Committee in July. The report was initially prepared by the MEP Philippe de Backer (ALDE/BEL), but has now been taken over by Petr Jezek (ALDE/CZE) following the former’s resignation from the European Parliament due to taking up a position in the Flemish Government. It is possible that the ECON Committee report will be used as the Parliament’s negotiation position during the upcoming ‘trilogues’ with the Council, and only the outcome of these negotiations will be submitted to a Plenary vote (see FEE CMU Policy Updates from March and April for further details on the Parliament’s report). As a reminder, both the European Parliament and the Council will have to agree on a compromise text before it can become EU law.

European Parliament draft report on STS securitisation published – 6 June

The ECON Committee draft report on the so-called simple, transparent and standardised (STS) securitisation has been published. The leading MEP on the dossier is Paul Tang (S&D/GER). Of particular interest, the Parliament draft report calls for a 20% retention ratio – a stark contrast to the Commission’s proposed 5%. Overall however, the publication of the draft report means that legislative work in the European Parliament can begin. The work has been delayed to the great disappointment of Member States and the Commission, and a number of MEPs remain sceptical about securitisation due to its alleged role in the US sub-prime crisis which triggered the global economic turmoil. In terms of next steps, a debate and vote in Plenary is expected for December.


Commissioner Hill attends hearing of the ECON Committee – 14 June

Commissioner Hill from DG FISMA attended a hearing of the ECON Committee. The hearing focused mostly on actions of the Capital Markets Union Action Plan. During the hearing, Hill notably confirmed that the focus will shift to removing obstacles, especially for SMEs. Proposals to reform venture capital in the EU are also to be expected. The Commission will, by September, announce further details on expected measures to improve the feedback from banks to SMEs that have been refused credit. On securitisation, the Commission has taken note of the concerns raised in the European Parliament but Commissioner Hill remained convinced that these concerns can be addressed. A consultation on a market for European personal pensions is to be expected in the upcoming weeks. And finally, a White Paper on reforming the European Supervisory Authorities (ESAs) should be expected for Autumn.



Council adopts its stance on prospectus rules – 8/17 June

Member States have approved their negotiating position on the Commission proposal for a Prospectus Regulation. Negotiations (‘trilogues’) will start in Autumn with the European Parliament to find a compromise on the dossier between the two institutions. The Commission will then have to give its final approval for the compromise text. With regard to SME prospectuses, the Council puts forward more detailed political guidance for ESMA, and positions itself as follows (Article 15):

  • Commission should focus on information that is material and relevant to investors making an investment decision;
  • Commission must ensure proportionality between the size of the company and the costs of producing a prospectus, and will take into account:
    • The need to minimise costs for SMEs;
    • The need to provide investors with “sufficient information”;
    • The various types of information needed by investors relating to equity and non-equity securities.
  • The minimum information in the SME prospectus should at least entail the following:
    • Essential information about the issuer (including for example an overview of business and prospects, risk factors specific to the issuer, audited historical financial information, and information on senior management);
    • Essential information about the securities and the offer (including risk factors related to the type of issued securities, and reasons for the offer and the use of proceeds).

In parallel, the European Parliament ECON Committee is set to vote on its position for prospectus reform in July. Under the leadership of the new lead rapporteur, the MEP Petr Jezek (ALDE/CZE), the European Parliament is now pondering whether or not to submit the Committee position for a Plenary vote at all before the trilogies.


Work Programme of the Slovak Presidency published – 30 June

The Slovak Presidency of the Council, which starts its six-month mandate on 1 July, has published its Work Programme. Of particular interest from the CMU side, the Work Programme states the following:

  • Importance of further progress on CMU in order to improve the economic “performance” and stability of the EU;
  • The Presidency will focus on “innovative means of financing” for businesses;
  • Efforts to help European SMEs access co-financing through capital markets;
  • Efforts to advance in the negotiations on venture capital schemes;
  • Reach a political agreement with the European Parliament on prospectus reform as well as securitisation.




ESMA report: Peer review on prospectus approval process – 30 June

The European Securities and Markets Authority (ESMA) has published a report on prospectus approval processes in different Member States. The study takes the form of a peer review on the efficiency and effectiveness of the national competent authorities’ (NCAs) approval of prospectuses. The report identifies significant differences between national prospectus approval procedures and criteria, and consequently calls for greater convergence and harmonisation of prospectus approval across the EU. Of particular interest, the report has identified the following:

  • Prospectuses are often complex and may consequently be difficult for investors to understand;
  • There are different interpretations between NCAs on certain disclosure requirements, and greater harmonisation in this regard could be beneficial.

ESMA moreover states its intention to look into the understandability of prospectuses, and “may address some of the legislative clarifications identified” in the study, in the context of the current prospectus reform. As a reminder, ESMA will be responsible for proposing practical solutions to technical (level 2) matters, including the format and disclosure requirements of SME prospectuses.




12/07/2016, Convergence of insolvency frameworks within the European Union – the way forward, European Commission, Slovak Presidency, Brussels.

12/07/2016, The impact of the EU regulatory framework for financial services, Bruegel, Brussels.

13/07/2016, Capital Markets Union: delivering new opportunities for SMEs through venture capital, ACCA, Brussels.

27/09/2016, Next steps on ESAs: funding and governance, Financial Future, Brussels.

08/11/2016, Cross-border distribution of funds, Financial Future, Brussels.

06/12/2016, Pan-European Personal Pension products, Financial Future, Brussels.