The Commission wants to simplify IPOs and insolvencies.
(Photo: REUTERS)
Brussels The EU Commission wants to strengthen the European capital markets. The Brussels authority presented three legislative proposals on Wednesday to simplify IPOs and insolvency procedures and to strengthen European clearing houses.
“We are preparing our capital markets for the future,” said Finance Commissioner Mairead McGuinness. “At the moment they are still too fragmented.”
In an international comparison, the European capital markets are underdeveloped. According to a study by the think tank New Financial, 75 percent of European companies are still financed through bank loans. Only a quarter of the financing requirement is covered by bonds on the capital market. In the US, the relationship between loans and bonds is reversed. In the UK it is 50/50.
As early as 2015, the Commission had therefore announced the goal of gradually turning the 27 national markets into a capital markets union. The three legislative proposals are another building block of this strategy.
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The different insolvency laws in the 27 EU countries have long been considered a major obstacle to investments in other European countries. The length of the bankruptcy proceedings varies between seven months and seven years, said McGuinness. The uncertainty deters investors.
Therefore, the rules will be harmonized and common minimum standards will be introduced. Among other things, supervisory boards should be obliged to register insolvency in good time in order to keep the loss in value for the creditors as low as possible. There should be a simplified procedure for micro-enterprises so that the owners are debt-free faster and can start again as entrepreneurs.
Reduce dependence on London clearing houses
IPOs should also become easier. The Commission wants to reduce the requirements for prospectuses and reduce compliance costs. Founders should be able to issue shares with different voting rights in order to retain control of their company. This should convince start-ups in particular not to go public in New York.
Finally, when it comes to clearing, the Commission wants to reduce dependence on the clearing houses in London. Even after Brexit, they still process the majority of derivatives transactions in euros. However, since Great Britain is now a third country, the arrangement poses a threat to financial stability from the Commission’s point of view. It therefore wants to oblige EU companies to settle part of their derivatives transactions with clearing houses in the euro zone for the first time. The securities regulator Esma is to develop the exact regulations within twelve months.
The Commission’s proposal was welcomed in the European Parliament. SPD MEP Rene Repasi said it was important to oblige companies to carry out their clearing transactions in the euro zone. Parliament must now examine whether the proposal is sufficient to move clearing out of London. Otherwise it has to be sharpened.
The economic policy spokesman for the conservative EPP group, Markus Ferber (CSU), also welcomed the reform of the stock exchange regulations. Too often, promising companies go public outside the EU because the process here is “too complex, lengthy and inflexible”. He pointed out that London is also revising its rules for IPOs. “The EU must be careful not to be left behind.”
More: The EU Commission wants to lure clearing away from London