The European Commission today adopted a package of measures intended to help EU capital markets support the bloc’s recovery from the coronavirus crisis, including the launch of a consultation on MiFID II changes aimed at increasing research coverage of small and medium-sized enterprises (SMEs) and bonds.
Overall the package aims to encourage greater investment in the economy, allow for the rapid recapitalisation of companies, and increase banks’ capacity to finance the recovery.
It comprises “targeted adjustments” to MiFID II, the Prospectus Regulation and securitisation rules.
The plan to increase the research coverage regime for SMEs and bonds is introduced by way of the launch of a consultation on amendments to a MiFID II delegated act.
“The exceptional circumstances resulting from the coronavirus pandemic have instilled a sense of urgency into the debate on investment analysts’ research,” said the Commission. “Increasing the visibility of European companies, in particular SMEs, to investors will promote more investment for the economic recovery.”
Investor groups like PensionsEurope have supported exempting research on SMEs from fee unbundling rules in order to foster investment opportunities in this sector of the economy.
According to BVI, the German fund management association, the Commission had proposed an optional approach allowing asset managers to choose whether to continue to pay for research directly or to bundle research and transaction costs for SME equities, as was the case before MiFID II.
It said it supported this in light of “the sharp reduction in the supply of research on SMEs” but that “the planned limit of €1bn for the market capitalisation of SMEs seems too low.”
The association also said it “very much” supported the proposal for a broad-based exemption for the payment of fixed income research, as asset managers currently paid for this type of research twice, once within the spread and another time directly.
The Commission today also proposed MiFID II amendments to free up resources for investment firms and professional investors, and to help develop euro-denominated energy markets. BVI suggested the envisaged exemptions on cost information for professional investors could go further.
The package of measures also included a type of short-form prospectus to facilitate capital raising in the public markets and changes to securitisation rules to support SME lending and the management of non-performing loans.
Valdis Dombrovskis, Commission executive vice president, said: “We are continuing with our efforts to help EU citizens and businesses during the coronavirus crisis and the subsequent recovery.
“Capital markets are vital to the recovery, because public financing alone will not be enough to get our economies back on track.”
The next step is for the European Parliament and the Council to position themselves with regard to the legislative proposals from the Commission. The consultation on the MiFID II delegated directive is open until 4 September.
The Commission is due to present a wider Capital Markets Union action plan in September, following on from recommendations developed by an expert group.