EU vows to reboot integration efforts between markets as it reviews its Capital Markets Union plan

Lucy White
European Leaders Attend EPP Congress
Jean-Claude Juncker's CMU plan aims to make it easier and more efficient for businesses to access investment across European borders (Source: Getty)

The European Commission has said it will “reboot” its Capital Markets Union (CMU) plan, aiming to strengthen Europe's financial system as Brexit looms.

Adopted in 2015, the CMU aims to make it easier and more efficient for businesses to access investment across European borders.

The commission's mid-term review, published today, has suggested a refreshed plan, outlining new measures to strengthen the powers of regulators and improve cross-border cooperation.

"As we face the departure of the largest EU financial centre, we are committed to stepping up our efforts to further strengthen and integrate the EU capital markets," said Valdis Dombrovskis, the European Commission's vice president responsible for the plan.

A pet project of the commission's president Jean-Claude Juncker, which has led to its nickname “the Juncker Plan”, CMU originally set out 33 measures to “establish the building blocks of an integrated capital market”.

These points ranged from supporting small and medium-sized enterprises (SMEs) seeking financing, such as by obliging governments and markets to signpost different funding options, to harmonising regulation in order to boost cross-border infrastructure investment.

So far, 20 measures have been passed from the original list – most recently a securitisation package to free up capacity on banks' balance sheets, and venture capital reforms to boost investment in SMEs.

Following the mid-term review, which was preceded by a public consultation, nine new elements have been added to the CMU.

“In light of political and economic change, European capital markets are facing a number of challenges, not least from Brexit. We need to ensure that the CMU project remains relevant and fit for purpose,” said Simon Lewis, chief executive of the Association for Financial Markets in Europe.

The European Securities and Markets Authority (Esma) powers will be strengthened, the prudential treatment of investment firms reviewed, and measures will be presented to support the purchase of non-performing loans.

As fintech booms, the commission will also look at the case for a dedicated EU licensing and passporting framework for the sector.

This would allow firms in the wider European Economic Area – which may potentially include the UK, post-Brexit – to operate freely in the EU.

Various regulations will also be examined, such as those governing public listings by SMEs and the treatment of cross-border investments and disputes.

Investment firms will also see some changes, as the CMU review promises to aid the cross-border distribution and supervision of mutual funds and alternative investment funds.

As well as looking at Europe as a whole, the commission has also promised to support local and regional capital market development.

Invest Europe, the trade body for private equity, venture capital and infrastructure in Europe, said it "shares the commission’s ambitions to reduce barriers for capital flow across borders".

However, it noted that individual member states will need to take the necessary actions to make the plans a reality.

Related articles