1) Beyond the five priority areas identified for short term action, what
Transcription
1) Beyond the five priority areas identified for short term action, what
1) Beyond the five priority areas identified for short term action, what other areas should be prioritised? The UK welcomes the open nature of the Commission’s consultation, which should provide a firm evidence base on which to base policy responses. The Action Plan must set out, on the basis of this consultation, a set of evidenced priorities that have impact. In the immediate term, Capital Markets Union should focus on: 1. Restarting the securitisation market The Commission should adopt a proposal for a Directive on simple, transparent and standardised securitisation. The Directive should establish a clear set of criteria to designate ‘qualifying’ securitisations and an effective and robust verification mechanism. Legislation should enable appropriate prudential capture of risk, ensure appropriate incentives for issuers and investors and enable securitisation to compete fairly with other asset classes. In particular this would enable medium sized banks, which typically use standardised models, to take advantage of opportunities to diversity their funding and serve the real economy. 2. Lowering the barriers to accessing capital markets The Commission should review the Prospectus Directive to strike a better balance between access to capital markets and investor protection. This should: i. Raise the exemption thresholds, so more small offers can be carried out without a prospectus ii. Review prospectus content to prevent excessively lengthy documents iii. Review whether the current arrangements for ex ante approval of prospectuses are appropriate in all cases iv. Ensure the costs faced by SMEs are significantly reduced Responses to a UK Government consultation in 2010 suggested that preparing a prospectus for a £5m (€7m) public offer can cost between £350,000 and £600,000 (€490,000 - €840,000), putting the capital market beyond the reach of too many SMEs. Reforms in the areas outlined above would allow more SMEs to access markets at lower cost, without compromising investor protection. 3. Supporting development of a pan-European private placement market The Commission should: i. Support the development of market standards, standard legal documentation, and in due course, a secondary market ii. Share best practice, particularly of successful withholding tax initiatives. iii. Explore the costs and benefits of emulating the US National Association of Insurance Commissioners credit scoring system Last year, the UK introduced a new exemption from withholding tax for private placements. In response, six major institutional investors committed to invest around £9 billion (€13 billion) in private placements and other direct lending to UK companies over the next five years. Other Member States should consider their own exemptions and the Commission should seek to establish and share best practice. In the US, National Association of Insurance Commissioners credit scores are a key feature of the successful private placement market. The NAIC, a central body for state-level insurance regulators, provides ratings services to US insurers investing in private placements The Commission could carry out a cost-benefit analysis of the idea of an EU equivalent. 4. Opening the market for SME lending by establishing minimum standards for SME credit information The Commission should recommend minimum standards to ensure: i. Credit information is of a high quality which includes both positive data, such as payment performance, and negative data, such as defaults. ii. There is adequate infrastructure in place to allow data to be shared. iii. Information is shared on an equal basis between banks and non-banks. There is currently a high degree of diversity in the EU in terms of what credit information is shared, by whom, how it is shared and who has access to it. This diversity means harmonisation in this area is likely to be difficult to achieve in the short term, while the largely domestic nature of these markets also points towards Member State action being more effective than European legislation in tackling the issue. We support the excellent work of the Commission in mapping the information that is currently available throughout the EU. The Commission should use this work to establish best practice and form the basis of official recommendations. 5. Removing barriers to funds operating cross-border The Commission should support the role of investment funds as alternative finance providers and identify and remove barriers to their operation across the EU. The Commission should review UCITS and AIFMD: i. Removing scope for Member States to impose additional requirements ii. Removing requirements for UCITS to appoint paying agents in each jurisdiction iii. Ensuring digital media is on an equal footing to traditional paper disclosure methods Investment funds are a significant source of funds in the EU. Commission work should focus on increasing this source of non-bank funding by identifying and removing barriers to growth and their operation cross border. Under both the AIFMD and the UCITS passports, some national regulators have imposed superequivalent requirements. This increases legal uncertainty for managers, adds cost, and discourages them from operating in other jurisdictions. The Commission should review these Directives in order to identify barriers with a view to achieving greater consistency, which would encourage funds to market cross border, increasing competition and choice in the market and creating new investment and financing opportunities. Legislation should also be updated to ensure it reflects emerging electronic distribution practices. In the medium term, Capital Markets Union should focus on: 6. Establishing vibrant venture capital markets in every Member State The Commission should study the effectiveness of Member State interventions in venture and seed capital markets with a view to establishing best practice and issuing Country Specific Recommendations. The EIB and EIF should publish details and analysis of their investment returns. Member States take varied approaches to supporting venture capital, but there has been little independent study comparing interventions. The Commission should establish best practices to assist Member States in designing effective interventions tailored to their jurisdictions. Institutional investment in European venture capital is hampered by a perception of poor returns. As a significant investor in the sector, EIB and EIF should publish details of their investment returns to the fullest extent possible under their transparency framework. 7. Developing European corporate bond markets ESMA should ensure MiFID II pre-trade transparency requirements are appropriately designed to support liquidity. The Commission should undertake a root-and-branch review of European corporate bond markets including drawing upon the conclusions of the UK’s Fair and Effective Markets Review. MiFID II brings significant reforms to the transparency of corporate bond transactions. Inappropriate calibration in this area could have significant impact on secondary market liquidity. ESMA should introduce new requirements very carefully, closely following the level 1 provisions. There are a range of views regarding the extent and nature of possible illiquidity problems in European corporate bond markets and the likely efficacy of potential solutions. A comprehensive review in this area would enable any future policy interventions to be appropriately targeted. This review can build on international work looking at market-based finance and shadow banking including the UK’s Fair and Effective Markets Review, which will report in June. 8. Promoting international consistency, cooperation and trade The Commission should actively engage in dialogue with key international partners to promote internationally consistent standards. The Commission should agree to a set of principles aimed at ensuring third country provisions are appropriately designed. Divergent standards lead to market fragmentation and regulatory arbitrage, undermining financial stability and European competitiveness. The Commission should seek to promote international consistency, making it easier for businesses to operate and capital to flow across international borders. Europe must remain open to international business. The Commission should establish a set of principles governing the design of third country provisions to ensure that, where regimes are appropriate, they are tailored to their justification for existence and are coherent with the international regulatory context. Equivalence assessments must be outcomes-based and proportionate. 9. Ensuring the ESAs contribute to a competitive Europe The ESAs should focus on fulfilling their existing mandate. The Commission should review the ESA Regulations, to include a binding requirement for all ESAs to consider competition. The ESAs have a critical role to play in ensuring high standards of implementation and co-ordinated supervision, which are fundamental to the success of CMU. While new ESA powers are not necessary for the development of CMU, the institutions can become more effective. To this end, the ESAs should have a binding requirement to consider competition when discharging their existing powers, particularly when drafting legislation. Competition is at the heart of efficient, open, and resilient economies and must therefore be at the heart of a successful Capital Markets Union. The ESAs should employ competition considerations as an additional tool to make financial services markets work better and more efficiently for all participants. Over the longer term, Capital Markets Union should focus on: 10. Building capability in all Member States The Commission should undertake a comprehensive review of capital markets capability to: i. Establish best practices for Member State interventions aimed at promoting capital markets capability and assisting national governments where necessary ii. Recommend an EBRD technical assistance programme aimed at improving capability in Member States with underdeveloped capital markets iii. Support Member States to create business and investor education programmes and cross border apprenticeships Attitudes, awareness, and capability in respect of market based financing are not uniform across the EU, with the need more acute in some Member States. These Member States need assistance on a fundamental level to address local cultural barriers and build supply and demand from the bottom up. The Commission should assist these Member States where necessary, helping them to design business and investor education programmes and cross border apprenticeships to build skills and experience and pursue an EBRD technical assistance programme. We believe there is a very positive and substantial agenda for action required to develop a strong capital markets union including a mix of industry led initiatives, reviewing and refining the existing legal framework and indeed further legislation. However, we do not see value in progressing the following measures: 1. Transfer of direct supervisory responsibilities to European institutions Supervision of market infrastructures such as Central Counterparties and Central Securities Depositaries must remain at Member State level. Creation of a single supervisor would not remove barriers to capital flows or have relevance to the development of markets. 2. A 29th regime for harmonisation of personal pensions This would not contribute to CMU objectives and cannot be justified on subsidiarity or proportionality grounds. 3. Tax harmonisation Member States tailor tax systems to the specific features of their jurisdiction. Measures to attempt tax harmonisation that would be lengthy and difficult to achieve given direct tax is a Member State competence and decided by unanimity. Furthermore, it is unlikely that such measures could be justified on subsidiarity grounds. 4. Harmonisation of insolvency laws Full harmonisation of insolvency laws is not practicable in the short or medium term. CMU should provide Member States with the impetus to consider whether their insolvency regime acts as a barrier to cross border investment. The Commission should focus on supporting Member States to build effective infrastructure and supporting professional services.