12th December 2014

Tuning ‘Capital Markets Union’ to deliver an engine for European Growth

In September the President to the European Commission, Jean-Claude Juncker, tasked Lord Hill in a letter to the incoming Commissioner designate, with “bringing about a well-regulated and integrated Capital Markets Union, encompassing all Member States by 2019 with a real view to maximising the benefits of capital markets and non-bank financial institutions for the real economy”.

‘Capital Markets Union’ marks the beginning of an important shift in the perspective and emphasis of policymakers from a post-crisis perspective, which was a regulatory agenda very rightly dominated by measures to establish financial stability and restore confidence, to a new focus on how to regain much needed economic growth in the EU. Nevertheless, the BBA believes it will continue to be important to maintain investor protection and stability as key objectives.

BBA members strongly welcome this initiative and will do all they can to contribute further analysis on how Capital Markets Union can be achieved successfully. The BBA considers Capital Markets Union as a key opportunity for the EU and an important opportunity for financial services providers to contribute through capital markets to economic growth and to fund jobs for EU citizens. In this respect, we would urge the European Commission to help all participants become very clear as to what the full range of potential users of EU capital markets would really want from a Capital Markets Union. We note that this should be a two-way dialogue, to ensure EU citizens and retail consumers are also aware of the benefits that capital markets can offer them both directly and indirectly.

The BBA considers Capital Markets Union’s purpose to be to strengthen the single market and to deliver a single rulebook for the EU. Unlike the Financial Services Action Plan (FSAP) of the recent past it will be critical that the measures therein are not simply a menu of legislative proposals, but rather a set of effective initiatives which are capable of delivering practical real-market, economic outcomes to ensure Europe’s financial markets can deliver the financing necessary for growth. The BBA would therefore propose that a key element of the framework should be to set measurable outcome-based targets that can be achieved in the short and medium-term. Furthermore, rather than focus on creating new supervisory structures, we would encourage the EU to ensure the European Supervisory Authorities are equipped to deliver supervisory convergence and a greater shift in their focus be made towards converging day-to-day implementation rather than rule-making.

For the success of this agenda and deeper capital markets, the BBA considers it critical that the EU ensures the measures that are adopted encourage international investors and issuers into EU markets and guarantees that Europe remains open and internationally competitive.

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