European Commission to back market solutions for Capital Markets Union
The European Commission’s Capital Markets Union (CMU) will not be created through legislation but with the market’s help to deliver solutions, Jonathan Hill says.
The commissioner for Financial Stability, Financial Services and the CMU said that, while the EU introduced wide-ranging reforms to repair damage from the financial crisis, new challenges may require alternative approaches.
Hill also said the future of a dedicated pensions stakeholder group for the European Insurance and Occupational Pensions Authority (EIOPA) needed further consultation, and that a simple private funding structure for the regulator should be feasible.
The new Commission put the creation of a single market for capital in the EU at the core of its policies, alongside boosting investment in infrastructure.
It published a green paper on the CMU earlier this year with the view that a single market for capital would increase lending to SMEs, boost capital for infrastructure and bridge the gap between investors and investable opportunities.
Speaking with IPE, Hill said now that legislation had helped restore stability, creating jobs and growth in the EU was the new challenge, with a single capital market assisting this.
“This challenge may require a completely different set of tools,” Hill said.
“Although some legislation will no doubt be needed, it will not always be the most effective and proportionate approach, and, in many cases, the onus will be on the market to deliver solutions.
“The Commission will therefore support market-driven solutions when they are likely to be effective, and regulatory changes only where they are necessary.”
The commissioner also denied plans for an overhaul of EIOPA, despite rumours swirling in Brussels and the European Parliament over changes to funding and stakeholder engagement structure.
An industry levy is expected to replace EU budget funding for EIOPA and its fellow supervisory authorities, after it was backed by the Commission and MEPs.
The Commission also alluded to plans to merge EIOPA’s two stakeholder engagement groups – for insurance and occupational pensions – leading to concerns the former would dominate agendas.
Hill said the issue of stakeholder groups needed further consultation before a decision could be made.
Hill said the Commission review demonstrated EIOPA and partner advisory authorities were working well and that no overhaul was foreseen.
However, he added: “We think it should be possible to achieve [private funding] in a simple way, although it is a bit too early to speculate on any concrete proposal at this stage.”
Hill also gave backing to European Long-term Investment Funds (ELTIFs), despite minimal growth in the amount of institutional investment into long-term and infrastructure assets thus far.
The Commission created a €315bn programme to channel capital into infrastructure projects, dubbed the ‘Junker Plan’, but this drew criticism from large institutional investors who viewed the regulatory framework as inappropriate.
Hill said ELTIFs would open the door for smaller insurers, local government and corporate pension funds to access long-term opportunities.
“All these investor groups need a well-regulated investment fund vehicle to manage the inherent risks,” Hill said.
“ELTIFs replicate the UCITS approach – we will open them up to a much larger population of potential investors.”