A general welcome has greeted the European Commission’s (EC) newly published Capital Markets Union (CMU) plan, an initiative that aims to build a true single market across all 28 European Union (EU) member states.
Writing in the business daily City AM, economic secretary to the Treasury, Harriett Baldwin, confirmed that the initiative had the support of the UK government. “We have called for the EU to focus on what people across Europe need most: jobs, economic growth and financial stability. And we have been clear that can only happen if the EU takes steps to improve its competitiveness and stimulate investment,” she commented. “That is a key part of our reform agenda.
“Developing an effective CMU will help achieve these aims. By lowering the costs of cross-border investment and creating deeper, more liquid capital markets, the CMU will help our businesses – from startups to infrastructure projects – get the access to the finance that they need to grow and succeed. And it will create a better range of opportunities for people to invest their money in successful ideas, pooling investment from across the single market.”
At accountancy firm EY, Andy Baldwin, head of financial services for Europe, the Middle East, India and Africa (EMEIA), said: “The CMU action plan is broad in remit and is attempting to not only enable the existing banks to lend more, but also act as ‘primer’ to other lending and capital channels in Europe.
“Given the ambition to ‘transform the capital markets’ the programme is necessarily multi-faceted with extended timeframes. That said, it will still require careful navigation through the EC given the many vested interests it challenges across the 28 markets.
“The desire to promote an EU securitisation framework and to bring back securitisation into the main stream is to be encouraged. Success here should help free up banks’ balance sheets and improve their ability to expand lending to the small and small and medium enterprise [SME] segment which has impacted growth across the Continent. Alongside this, the proposed changes to the Prospectus Directive will also be helpful in helping larger businesses raise funds on the public markets in a more straightforward manner.
“Perhaps unsurprisingly, given governments’ interests across Europe in promoting entrepreneurship, support for start-ups also features prominently through the CMU’s consultation on venture capital funds (VCFs) and the EC’s determination to promote alternative finance. The European FinTech sector generally, and alternative finance more specifically, while still fledgling, is one of the most exciting high growth opportunities at the moment with real momentum with both consumers and the major institutional players – if the barriers can be removed. All it needs is capital to thrive.
“Among the less attention-grabbing and more practical policies are the ones to harmonise the tax and insolvency discrepancies between the 28 EU states. If the CMU can accomplish this, then the initiative will be rightly viewed as perhaps the most revolutionary. Policies to change consumer behaviour to make sure they consider and access alternative lending and capital also needs to put in place alongside legislative reform.”
Kicking off day two of the Singapore Fintech Festival, Deloitte Chairman David Cruikshank said that fintech is significant for three reasons. First, customer expectations of services are higher than ever. Second, barriers to entry are lower than before. And finally, financial institutions (FIs) face a threat of what a competitor might do.
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