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Capital Markets Union – mid-term review and the Brexit effect

Capital Markets Union – mid-term review & Brexit effect

Capital Markets Union (CMU) is already half way into its four-year plan to improve the functioning of European capital markets.

Jon Hogan

Director Regulatory Affairs, International Standards Group

KPMG in the UK


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Capital Markets Union (CMU) is already half way into its four-year plan to improve the functioning of European capital markets. How much has been achieved and what more needs to be done? These are questions being asked by the European Commission to stakeholders as part of a mid-term review (read for details). Despite the challenges and barriers, Brexit being a significant but unknown one, the goals remain valid, perhaps even more so.

CMU is the flagship initiative of the European Commission to boost levels of investment by better linking investors to growing businesses (read KPMG views). Brexit, although not explicitly mentioned, must be a major consideration given the volume of European capital markets activity in the UK. Depending on the outcome of the negotiations, the UK may yet remain a major provider of capital markets activity, but growth in other financial centres will also be needed.

The original CMU plans included measures to recalibrate capital charges against business lending and infrastructure investment, to simplify the process of issuing a prospectus, to revitalise securitisations, to support Private Equity and Venture capital and to strengthen insolvency frameworks. Some progress has been made, and in the coming months proposals are expected on personal pensions, FinTech and sustainable finance.

So what more could be done? Views are sought on:

  • Financing for innovation, start-ups and non-listed companies
  • Making it easier for companies to enter and raise capital on public markets
  • Increasing long-term, infrastructure and sustainable investment
  • Fostering retail investment
  • Strengthening bank lending capacity
  • Facilitating cross-border investment

The Commission planned to have the entire package of proposals complete by 2019. Critics say the plans lack sufficient ambition and won’t be quick enough. The Commission has kept its side of the bargain, though, consistently working through proposals by collaborating extensively with stakeholder groups. The same can’t always be said of others, industry included, which, weighed under major regulatory projects, is struggling to take full advantage of the commercial opportunities bigger and deeper capital markets would offer.

For more information, please contact Jon Hogan.

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