Brussels The EU Commission presented four new legislative proposals on Thursday that are intended to pave the way for a unified financial and capital market in the Union. These include steps to create more transparency, improve investor protection, simplify access to financial data and make it easier to set up European long-term investment funds.
The package comes six years after the EU presented its first proposal for a Capital Markets Union. This is intended to break down barriers between national financial markets, make it easier for companies to raise capital and optimize conditions for investors. So far, the EU has had to compensate for a competitive disadvantage compared to the USA when it comes to financing growth companies and new technologies.
But even after the long preparation period, there has been criticism of the initiative: “The package is a step in the right direction, but not a great success,” complains the CSU MEP and economic policy spokesman for the EPP group, Markus Ferber. “If the EU wants to play in the geopolitical Champions League, we also need an appropriate financial system,” emphasizes Ferber. The current proposals are at best “a cautious beginning”. The EU Commission once again ignored the tricky issues relating to insolvency and tax law.
Part of the package is a central database with information about the finances and sustainability of companies. The EU-wide information platform “European Single Access Point” should make it easier for investors to invest in the EU. Information about listed companies as well as smaller companies should be listed centrally on the platform.
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Investors should also be able to compare the prices of shares and other financial products on all European trading venues in the future. A central register, called “Consolidated Tape”, is supposed to bundle this information in real time – it is currently not available in a standardized manner. This should create more transparency and link the European markets more closely.
The German fund association BVI praises the initiative because it helps to reduce costs for all market participants. At the same time, however, the fund lobby emphasizes that the problem of ever higher prices for market data has not yet been solved.
Stricter rules for mutual funds
Against the background of Brexit, the legislative package also provides for stricter rules for investment funds that are controlled from abroad. This is intended to counteract so-called letterbox companies that are registered in the EU – for example in countries with low taxes such as Luxembourg – but relocate essential functions and assets abroad.
For Ferber, this part of the EU initiative is an important signal to the UK and the financial center of London: “It is not possible that EU law is systematically undermined by funds outsourcing their essential services. That is also a question of the same rules of play in the internal market and consumer protection. “
The Commission proposal also provides for restrictions on the business model of new brokers such as Trade Republic. Specifically, it is about the prohibition of “Payment for Order Flow”, under which retail brokers offer their customers free or very cheap securities trading, but then forward the buy and sell orders exclusively to a central market participant for a refund.
This is an important topic for Ferber: “Obvious questions arise about the broker’s conflicts of interest, cost transparency and quality of execution. But we have to see whether we should resort to the ‘nuclear option’ of a ban right away. “Ferber emphasizes:” At the end of the day, the Capital Markets Union is also about democratizing access to the financial markets. “
Top bankers urge more speed
Now the European Parliament and the EU states have to deal with the legislative proposals. Both institutions can still make changes before the package is finally adopted. A process that experience has shown can drag on.
Last week, top European bankers once again warned that the EU was making far too slow progress on the way to capital markets union. Without a real internal market in the Union, investments and innovations too often flow to the USA, warned Deutsche Bank boss Christian Sewing and BNP Paribas chairman Jean Lemierre at the virtual branch meeting European Banking Congress (EBC).
Sewing pointed out that the corona vaccine manufacturer Biontech from Mainz went public in New York and not in Europe. That has to change, because “at some point, if the financing is made elsewhere, I tell you, the technology will also be somewhere else”.
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