Jonathan Hill has pledged to publish an action plan for the creation of the Capital Markets Union (CMU) by next year and called for the development of new long-term, stable debt instruments.
Opening the Finance for Growth conference in Brussels today, his first major policy speech since assuming office last week, the financial services commissioner said the European Long Term Investment Fund (ELTIF) would be one of the immediate means for his new directorate general to bring about greater European long-term investment.
Nevertheless, he called on a broad range of stakeholders – including national and European lawmakers, NGOs and the financial industry – to suggest means of creating the CMU when he launches a public consultation in the coming months.
“I want to hear ideas on how we can get more cross-border investment but in forms that are stable, in which investors do not run for the exit when the going gets tough,” he said.
“In particular, I am interested in ideas for more market finance instruments – but not just in safe short-term debt, but in longer-term, stable debt that encourages long-term investment, and in real risk capital that encourages innovation.”
The UK politician, successor to internal markets commissioner Michel Barnier, said bringing about the CMU would be a long-term project and accepted that it could not be created overnight.
But he said early actions – including passing the regulation governing the ELTIF by the end of the year and pushing for a single market for high-quality securitisation – would see Commission president Jean-Claude Juncker able to use the measures as part of his proposed €300bn investment programme.
He promoted the CMU as a positive step for businesses and savers, able to avail themselves of a greater range of loan and savings products, but he also noted the divergence of national regulation in a number of areas.
“The situation at the moment is one of disunity, of fragmentation,” he said.
“This is holding back the size and depth of capital markets, making it difficult for investors to diversify.”
Hill, a former government minister in the British Conservative Party that under former prime minister Margaret Thatcher was responsible for the 1986 de-regulation of UK financial markets, warned against expecting a “big bonfire of existing regulations” to aid growth.
“There can be no going back to the old, pre-crisis ways,” he said.
“And equally, if we find wrongdoing in the financial services sector, whether it is manipulating the market or pulling the wool over the eyes of unsuspecting customers, the system should come down on perpetrators like a ton of bricks.”
Hill has previously said the CMU should be functional by 2019, and it is one of Juncker’s key policy proposals for his term.
In October, Hill identified the “underdeveloped” European pension market as one of the areas holding back the launch of a CMU, but has otherwise offered few details on how the Commission could bring about greater harmonisation of capital markets.
Concerns have also been raised that a recent draft of the revised IORP Directive was at odds with the creation of a CMU, as it stripped the Commission and European supervisors of the ability to set technical standards for the pensions industry, thereby potentially undermining its ability to invest for the long term.