FEE CMU Policy Update

January 2016

European Commission

Public consultation on long-term and sustainable investment – 18 December

The European Commission has launched a public consultation on long-term and sustainable investment. The purpose of the consultation is to look into how institutional investors, asset managers and “other service providers” take account of Environmental, Social and Governance (ESG) information and performance of companies or assets when considering investment options. Moreover, the consultation will more broadly look into obstacles to long-term sustainable investment. The consultation is open until 25 March.


Public consultation on non-financial reporting guidelines – 15 January

The European Commission has also opened a public consultation on non-financial reporting guidelines, with the view of collecting stakeholders’ views on non-binding guidance and methodology for reporting of non-financial information (NFI). The consultation is open until 15 April.


Commissioner Hill letter to Roberto Gualtieri (S&D/ITA), Chair of the European Parliament ECON Committee – 18 January

The Commissioner Jonathan Hill has submitted a letter to the MEP and European Parliament’s ECON Committee Chair Roberto Gualtieri (S&D/ITA) with regard to Commission 2016 priorities for the CMU. Most of the letter’s contents are a confirmation of what is already widely known. Of particular interest, the Commissioner notably promises to launch a bi-annual report on the progress with CMU. Other points of interest include the Commission’s plans for reforming the European venture capital regime and taking steps towards a new pan-European venture capital fund-of-funds during the first half of the year, a consultation on key barriers to cross-border distribution of investment funds during the spring, and a proposal on business insolvency by the end of the year (with potential public consultation by June).

Keynote speech by Commissioner Jonathan Hill at the DG FISMA Conference on Covered Bonds – 1 February

The Commissioner Jonathan Hill has delivered a speech at the DG FISMA’s conference on covered bonds, focusing on the recently closed Commission consultation on the topic and highlighting some of the major trends in responses. According to Commissioner Hill, a major reason for the consultation was to understand the underlying reasons behind the fragmentation of the European covered bonds market in order to take best steps towards further convergence of national covered bond frameworks. A number of respondents to the consultation notably highlighted that the market fragmentation is less die to differences between national regimes, but rather a cause of the decline in mortgage markets. Many respondents furthermore felt that the current national systems for covered bonds work rather well. The Commissioner consequently emphasises that he is not aiming for a harmonised framework, but rather to build on working national systems and to see whether there are “unnecessary legal barriers” that prevent proper investment in covered bonds across Europe. Having said that, many respondents called for minimum quality standards for covered bonds, and thereby the Commissioner will look into helping investors to better compare products, assess risk, a “more consistent” disclosure system, and overall greater transparency. Based on the results of the consultation, the Commission will decide what legislative measures if any will be necessary to address the identified challenges.



European Parliament

European Parliament adopts Burkhard Balz report – 19 January

The European Parliament has adopted a final version of the report titled stocktaking and challenges of the EU Financial Services Regulation, with the MEP Burkhard Balz (EPP/GER) as the lead rapporteur. The report was adopted with a significant majority of 575 in favour and 116 against. No major changes were introduced to the report. Of particular interest, the report notably welcomes the review of the Prospectus Directive, calls for a “considerable reduction” of the debt-equity bias, calls for reinforcing the role and mandate of European Supervisory Authorities (ESAs), and calls on the Commission to assess the impact on financial stability of IFRS fair value accounting in comparison to prudent accounting. The report has no legislative impact, but especially given the wide margin of adoption it provides valuable insights into some of the positions that can be expected from the European Parliament’s side with regard to a number of CMU related initiatives.



Prospectus update – Coreper II discusses prospectus reform – 27 January

The Permanent Representatives of EU Member States have held a preliminary discussion on the Commission proposal for reforming the EU prospectus regime. The meetings are not public and consequently no detailed information with regard to the outcomes of the discussion is available. However, the Dutch Presidency is planning for a Council agreement on the Prospectus Regulation in May. Member States have overall been broadly welcoming on the proposal, but each with some concerns with regard to specific provisions. Of additional interest, a number of Member States have regretted the fact that a number of provisions of the prospectus reform will be dealt with through separate delegated and implementing acts (such as for example the exact format and contents of the specific simplified prospectuses), feeling that these discussions are of a more political nature and should consequently be subject to political discussion in the framework of debating the Regulation proposal itself.




EBA consults on draft guidelines on implicit support for securitisation transactions – 20 January

The European Banking Authority (EBA) has launched a public consultation on draft Guidelines on implicit support for securitisation transactions. The guidelines aim to provide greater clarity on what constitutes arm’s length conditions and when a transaction is not structured to provide support for securitisations. The deadline for responding to the consultation is 20 April.


“ECB Backs Harmonization of Laws Governing European Covered Bonds” – 29 January

According to Bloomberg, the European Central Bank (ECB) has expressed its support for European Commission’s plans to standardise the covered bonds markets in the EU. The current market for covered bonds is fragmented between Member States, and the Commission is planning to bring greater coherence into the mix notably with the view of fostering a greater diversity of and accessibility to non-bank financing options. The Commission is notably considering the enforcement of a single rule book for covered bonds.



Other News

UEAPME on bank feedback for SMEs who have been refused loans – 15 January

The Economic Policy Director of European Association of Craft, Small and Medium-sized Enterprises (UEAPME), Mr. Gerhard Huemer, has expressed his support for Commission plans to improve the current system of bank feedback to SMEs when loan requests have been rejected. He warned at the same time about the risks of an European one-size-fits-all approach since the feedback mechanisms can differ significantly between commercial banks using computer based feedback systems, and the often orally provided feedback by managers of local banks.

Three Reforms to Boost Europe – 18 January

The Eurogroup president Jeroen Dijsselbloem has published an opinion piece for the Wallstreet Journal in which he notably emphasises the importance of the CMU project in contributing to growth and economic recovery in Europe. Of particular interest, Mr. Dijsselbloem notably argues that better integrated capital markets will “strengthen cross-border risk-sharing”, and the diversification of potential funding sources is a key element of risk mitigation. For this purpose, he calls for an EU framework for securitisation, a reform of the prospectus regime, and for support for new means of financing such as crowdfunding. Mr. Dijsselbloem’s comments are of particular interest not only given his role as the Eurogroup’s president, but also due to the Dutch Presidency that will run until June this year. Indeed, making further progress on the CMU dossier appears to be a priority, and in particular on securitisation and prospectuses further progress in the Council is to be anticipated.



Event reports

EUF: Building bridges between Finance and SMEs – 27 January

On Wednesday 27 January a CMU-related event organised by the European Federation for the factoring and commercial finance industry (EUF) and hosted by the MEP Markus Ferber (EPP/GER) took place. The event brought together a wide range of European Parliament, European Commission, financial industry and SME’s representatives to discuss with concrete examples the obstacles to financing that SMEs in Europe are facing.

Most SME representatives emphasised the continuing importance of bank financing, and expressed mild concerns about the Commission’s relatively timid attention on the banking sector in the context of its CMU Action Plan. Access to the capital markets were broadly considered as interesting and promising, but only of greatest relevance to innovative technology start-ups. Of additional interest, Mr. Ferber provided detailed comments on what he considers to be the priority areas to address when considering SME financing in the CMU context. He notably emphasised that there are wider tools to consider for SME financing than those outlined in the CMU Action Plan, and that access to equity financing and ensuing potential loss of ownership is not a tempting option for many SMEs. As a key MEP from the largest European Parliament political group (EPP), Mr. Ferber’s views provide valuable insights into what positions can be expected from the Parliament’s side in the upcoming months. A Commission representative provided an overview of Commission action for this year and notably confirmed that the Commission will not be looking into tax incentives. Mr. Gerhard Huemer from UEAPME highlighted the continuing importance of bank financing for a majority of SMEs, and called for better proportionality of banking regulation especially between large multinational and smaller local banks.




02/02/2016, Capital Markets Union: the key to unlocking financing in Europe?, Politico, 09:00-16:45, Paris.

02/02/2016, 2015 EBF Tax Conference, European Banking Federation, 09:30-17:30, Brussels.

03/02/2016, Europe’s untapped capital market. Rethinking integration after the great financial crisis, CEPS, 13:15-15:00, Brussels.

09/02/2016, The European economic outlook 2016, EPC, 14:30-16:00, Brussels.

01/03/2016, EU Prospectus Regulation – Striking a balance, QED, 14:30-16:45, Brussels.

24/05/2016, 14th Annual European Financial Services Conference, Forum Europe, 08:30-15:00, Brussels.