In 2015 the European Commission published its action plan for the creation of a Capital Markets Union (CMU) by 2019. The desire is to help diversify the EU’s financial system by:
- creating opportunities for retail and institutional investors;
- cutting obstacles to cross-border investment;
- and enhancing EU supervisory convergence throughout the EU.
The objective is to reach a fully functioning CMU by 2019. Specifically this will include action in the following areas:
European Long Term Investment Fund (ELTIF): As well as creating this new vehicle for long term projects, Solvency II rules have been revised.
AIF loans: Work will be undertaken to develop a coordinated approach among the three European Supervisory Authorities with regard to alternative investment funds originating or participating in loans.
Venture capital: The Commission launched a consultation on the existing European Venture Capital Funds (EuVECA) regulation and European Social Entrepreneurship Funds (EuSEF) regulation with a view to improving take-up.
Cross-border marketing: The Commission intends to work with ESMA to remove obstacles to cross-border marketing for investment funds.
Regulatory review: The Commission consulted on the cumulative impact of financial legislation in recent years. ALFI responded, advocating that rule making be more principles based, and saying overly detailed rules will not be able to cope with technical change and innovation. There are also moves to upgrade capital requirements regulations and review the prospectus directive.
Securitisation: To tackle investment shortages by increasing and diversifying funding sources, the Commission would like to help with the relaunch of sound securitisation markets. They have proposed a regulatory framework intended to be simple, transparent, standardised, and subject to adequate supervisory control. They estimate that a revival of this market could generate EUR100-150bn additional funding for the European economy. ALFI welcomed the initiative, while stating that for success the regulatory framework needs to be stable, holistic, clear and executable.