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Banking 02 Nov 2018

Building Europe: From crowdfunding to an EU-wide pension scheme

More than seven months ago, the European Commission (CE) launched its action plan to help build a true single market for capital, one of the pivotal pending issues in Europe’s path towards integration. One of the key goals of the single market is to improve access to financing for European companies and to unblock the barriers to investments between countries of the European Union (EU). What progress has been made so far since September? And especially, what other pending points should be addressed before the end of 2016?

On April 25th, the first report on the current standing of the Capital Markets Union was presented in Brussels. Several measures have already been carried out, such as the legislative proposal for creating a regulatory framework on securitizations and cost reduction for SMEs and startups that need to access the markets looking for financing.

Also, the Green Paper on Retail Financial Services, published on December 2015, focuses on the barriers to the creation a single, more integrated, financial service market. Another one of the relevant measures was the launch of a consultation on an effective insolvency framework within the EU. The consultation period is set to conclude on June 14th.

But there is still a lot of work to be done. The European Commission has defined the following priorities to progress toward the single market through the end of the year:

  • Crowdfunding: The European institution will publish in short a report on crowfunding in the EU and the actions that each country has already adopted. The Commission has identified that the development of crowfunding platforms is concentrated in a few member States, and that its cross-border activity is relatively low. The EC-report represents a first step for the identification of the development of this market, the coordination of regulatory actions and will ensure an appropriate clarity in the app of EU standards.
  • Venture Capital Markets: Based on the results of the consultation process ended on January 2016, the Commission will launch a legislative proposal to reinforce the venture capital regulation, expanding the range of both investors and companies that can benefit from these funds. On the other hand, the Commission launched a study focusing on the promotion of fiscal incentives for venture capital and business angels.
  • Domestic barriers that hinder the free movement of capitals: In last November’s ECOFIN, the EU countries expressed their intent interest on cooperating with the EC in the identification of national barriers hindering the free movement of capital and establishing a procedure to eliminate those that are more detrimental and unjustified.
  • Barriers to the cross-border distribution of investment funds: The EC is preparing a public consultation this May aimed at fund managers, investors and consumers to learn where and why there are distribution barriers.
  • Business Growth Funds: The EC, together with the Member states, intends to explore ways to build a pan-European approach to better connect businesses with high-growth potential with a range of funding sources.
  • European Personal Pensions: The personal pension sector is one of the most pressing concerns of the European population. The Commission is aware of this and that is why it will assess the political framework to establish a voluntary market of European pensions. The EC will examine the domestic experiences of the members States, including the problems in consumer protection and transparency. A new EIOPA (European Insurance and Occupational Pensions Authority) report is scheduled for release in May, and a study focusing on fiscal and regulatory aspects should also be published before summer.
  • Solutions to improve SME access to funding sources: The EC will seek to cooperate with key banking associations in the sector to improve the information that SMEs receive when they apply for a loan and, in particular, when the loan is denied by the bank. Also, the EC wants to develop an information system where small businesses can gather information on the different sources and funding options.
  • Capital Requirements Regulation: In response to the public consultation regarding the potential impact of the CRR and CRD IV directives – which establish capital requirements for European banks – on the provision of funding to the economy, the Commission expects to study if it is necessary to review capital requirements to banks, to favor the funding of infrastructures and long-term investments.

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