The European Commission has launched a landmark project, starting with a three-month consultation period, to unlock funding for Europe’s businesses and to boost growth through the creation of a single market for capital.
The Capital Markets Union aims to break down the barriers that are blocking cross-border investments in the EU and preventing businesses from getting access to finance.
“The current environment is tough for businesses that remain heavily reliant on banks and relatively less on capital markets. The opposite is true in other parts of the world. One example of the opportunities a fully functioning single market for capital could offer: if EU venture capital markets were as deep as the US, as much as €90 billion more in funds would have been available to companies between 2008 and 2013,” the Commission said.
The current environment is tough for businesses
The November 2014 Investment Plan for Europe already pinpointed some measures that can be taken in the short term. These include the implementation of European Long-term Investment Funds regulation, ‘high-quality’ securitisation, standardised credit information on SMEs, private placement and the review of the Prospectus Directive.
With this union, the Commission also wants to clear obstacles that are preventing those who need financing from reaching investors and make the system for channelling those funds – the investment chain – as efficient as possible.
“The direction we need to take is clear: to build a single market for capital from the bottom up, identifying barriers and knocking them down one by one. Capital Markets Union is about unlocking liquidity that is abundant, but currently frozen, and putting it to work in support of Europe’s businesses, and particularly SMEs,” said EU Commissioner Jonathan Hill, responsible for financial stability, financial services and the Capital Markets Union.
Two complementary consultations on ‘high-quality’ securitisation and the prospectus directive were also launched.
Contributions are to be sent by May 13. Following the public consultation, the Commission will adopt an action plan this summer, setting out its roadmap and timeline for putting in place the building blocks of a Capital Markets Union by 2019.