EU to address 'cumulative impact' of financial reform as part of plans for Capital Markets Union

It has asked firms to help it identify "inconsistencies and incoherence" between the various regulatory regimes, as well as "unnecessary regulatory burdens and factors negatively affecting long-term investment and growth". It has published a consultation as part of its CMU Action Plan, which is intended to create a single market for investment capital and encourage diverse sources of funding.

Jonathan Hill, the commissioner responsible for financial services and the CMU project, said that the intention was "to help European businesses, and our SMEs in particular, have a wider range of funding sources".

"I want [the CMU] to give consumers more options for investing their money," he said. "I want to knock down barriers to make it easier for capital to flow freely across all 28 member states."

In a speech to mark the publication of the Action Plan, Hill said that US SMEs received about five times as much non-bank funding as those in the EU. Companies could have raised an extra €90 billion in venture capital over the past five years if the markets in the EU were as well developed as those in the US, he said.

Hill said that the EU had been forced to "legislate at speed" in response to the financial crisis, and that it was time to revisit the combined effects of those rules as part of "work to create an environment that supports investment". However, he said that the fact that those rules had "made the system safer ... [and] more resilient" was not in question.

The Commission began consulting on its CMU project in January 2015, and the contents of the Action Plan are based on the conclusions of that work. The Action Plan includes three immediate  steps: legislative proposals to establish a framework for simple, transparent and standardised securitisation; an adjustment to the 'Solvency II' legislation to make it easier for insurers to invest in infrastructure and the new European Long-Term Investment Funds (ELTIFs); and a consultation on how to build a pan-EU covered bond framework.

The package also includes the call for evidence on the impact of financial regulation, and a further consultation on how to boost venture capital through targeted changes to the regulations governing this type of investment. The Commission has also committed to reviewing the Prospectus Directive by the end of 2015 to make it easier for SMEs to achieve a listing in the capital markets; and to publish a Green Paper on cross-border retail financial services.

Looking ahead to 2016 and beyond, the Commission has set out a programme of work to support access to finance, increase investment and remove barriers to cross-border investment. Taken together, the commitments in the Action Plan are designed to "put in place the building blocks" of the CMU by 2019, the Commission said.

The current EU rules on securitisation were introduced following the 2008 financial crisis. The Commission has now proposed simplifying and standardising these rules, and reducing the capital charges associated with creating and buying certain securities. Securitisation refers to the creation by banks and other lenders of a financial asset for purchase by a wider range of investors by bundling other assets, such as car loans or SME loans.

The Commission has also proposed the creation of a distinct infrastructure asset class under the Solvency II regime, based on the recommendations of the European Insurance and Occupational Pensions Authority (EIOPA). This would reduce the amount of capital that insurers would have to hold against the debt and equity of qualifying infrastructure projects once the new Solvency II regulatory regime takes effect next year.