Next week marks the start of a new phase of the EU's plans for a Capital Markets Union. Following months of planning and consultation, and a public hearing in June, the European Commission will publish its Action Plan on the 30th of September, setting out its vision for the role the financial services sector should play over the next few years.
In light of this watershed moment in financial services policy, DeHavilland EU has published a new white paper, providing a survey of the legislative landscape at the European level. Download the white paper online here.
Lord Hill makes his mark
Along with the Action Plan, the EU executive will table two rather more tangible proposals, the first since the beginning of 2014. Given the sheer volume of legislation passed by the last Commission, this long pause is notable in itself. But even more significant is the subject matter: the two Regulations, leaked some weeks ago, aim to rehabilitate the market for securitisation in Europe. Given that asset-backed securities (particularly those tied to mortgages) played a major part in the recent financial crisis, this marks a stark shift in emphasis in Brussels from the fire-fighting regulations passed in the heat of the moment to a new era of investment-friendly, growth-focused policy.
The man overseeing this new era is Commissioner Jonathan Hill. And while the CMU cannot truly be described as his brainchild, planned as it was for months before he took office in November last year, it is fitting, and perhaps a sign of the times, that a liberal British conservative will mastermind its implementation. While his predecessor Michel Barnier will be remembered for (necessarily) tightening regulations, Lord Hill will be looking for a different legacy: as the man who helped stabilise the recovery and lead Europe back into growth
How momentous is this shift?
The securitisation package is the most obvious example of this new focus, setting out the criteria by which certain assets will be subject to lower capital requirements. But the EU has begun a period of, if not undoing, then at least re-evaluating legislation passed by the last Commission. In particular the impact of tighter controls on banks' lending capacity will be examined thoroughly, while the yet-to-be implemented Solvency II framework will be tweaked to encourage infrastructure investment. Meanwhile a revision of the Prospectus Directive will try to make it easier for smaller companies to raise capital.
Looking forward, but with one eye on the past
There is of course a balance to be found between encouraging growth and ensuring financial stability. To those suspicious of a new wave of deregulation, it may seem that policymakers have already forgotten the lessons of the last decade, which shook the financial services industry to its core. But Lord Hill might point out that his full title is "Commissioner for Financial Stability, Financial Services & Capital Markets Union" - a mouthful, but a deliberately ordered one.
Regulators are far from insensible of the risks, and this year will also see a new Regulation on making sure that central counterparties (CCPs) can be safely resolved to avoid destabilising the system. There has also been promise of a new common deposit insurance scheme to complete the Eurozone's Banking Union, while the controversial financial transaction tax is still being worked on behind the scenes.
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