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CMU must remove barriers to long-term investment – PensionsEurope

The launch of the Capital Markets Union (CMU) should be seen as an opportunity to amend regulation that hinders long-term investment, the European Commission has been told.

Matti Leppälä, secretary general at PensionsEurope, said pension funds wished to invest more in long-term assets but that schemes faced obstacles that could only be solved if the Commission and national governments “stepped up dialogue” with the industry. 

“Under the right conditions, their capital can make a huge contribution to the future growth of the EU real economy,” he said. “As long-term investors, they can also contribute to financial stability.

“However, this will only happen if EU policies work well with and for pensions.”

In the association’s consultation response, it noted that trust in markets was required for pension funds to be long-term investors. 

“Governments should never disappoint this trust by raiding pension funds or forcing pension funds to invest (or divest) in certain projects [and] regions,” it said.

It also stressed that stability of policy would be important if governments wished to attract commitments from pension funds. 

“The European Commission should introduce measurements to reduce political risks,” it said. “Safeguarding of legal certainty is of great importance, in particular for long-term cross-border investments.”

The suggestion echoes a proposal put forward by the Institutional Investors Group on Climate Change, which proposed a measure of EU guarantees against retroactive changes to policy that would impact projects.

In a separate position paper on the CMU, PensionsEurope also stressed the problems the diverse pension sector would face in solving any obstacles to long-term investment, urging an exchange of ideas and best practice among member states to incentivise investments.

It addressed the potentially detrimental impact of a financial transaction tax (FTT), currently being discussed by a minority of the EU’s 28 member states.

“We should avoid extra costs on pensioners – with a potential FTT, for example,” it said. “Regulation should not unduly lock capital in the pension funds, which could be put to more productive use.”

The position paper also argued greater standardisation of market data was needed to remove any barriers that may be in place, an idea that was already taken up by the Commission when it last year proposed credit information on infrastructure loans be made available.

The pension association’s comments on the CMU come as the Commission’s green paper consultation comes to a close.

Jonathan Hill, the commissioner for financial stability, has previously praised the CMU as a “classic” single market project that would look to unlock the abundant liquidity within the market.

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