Capital Markets Union – Priorities for the Union’s capital markets

With a view to European elections in June and the priorities for the next European Commission mandate, AMAFI has published a set of recommendations aimed at encouraging deep, liquid, and competitive capital markets that can contribute to business financing and offer effective savings tools (AMAFI / 23-88).

The proposals, which resulted from months of work by AMAFI’s European Action Committee, call for a radical shift in thinking that will put competitiveness on an equal footing with financial stability, transparency and investor protection.

AMAFI Chairman Stéphane Giordano has shared these proposals with institutional talking partners both in France (minister’s offices, Treasury and AMF) and in Europe (Commission, ESMA and member state representatives).

In France

There is broad consensus that European firms and markets are losing their competitive edge, at a time when market-based financing for the economy is far below potential. Domestic talking partners therefore welcomed AMAFI’s proposals to change the European system, which include making it mandatory to conduct competitiveness tests before introducing new legislation, empowering ESMA to issue no-action letters, and two key recommendations on securitisation and the development of long-term savings tools.

France is due to propose a series of reforms before the end of April. These will be crafted by a task force formed at the behest of Bruno Le Maire and led by  Christian Noyer, former French central bank governor, to  contribute to the current reflections to reinvigorate the Capital Markets Union initiative.

In Europe

While representatives from the Commission and member states welcomed AMAFI’s proposals in principle, some expressed caution on their implementation procedures and effects. For example, measures to strengthen ESMA’s powers, which would mean the loss of supervisory sovereignty, or to develop a European securitisation market backed by a pan-European guarantee from the European Investment Bank, require a level of solidarity that some member states would refuse to countenance.

AMAFI held extensive discussions with Verena Ross, Chair of EMSA, which has set up a Task Force  to work on these issues and is expected to announce its conclusions in late May. Chair Ross welcomed AMAFI’s proposals overall, especially those on calibrating rules at Levels 2 and 3 rather than Level 1, and on the need to expedite the European legislative process, for example by empowering European supervisory authorities to issue no-action letters. However, she expressed a nuanced view on several points.

On the proposal to add competitiveness to ESMA’s mandate, she agreed that this might be beneficial for rulemaking but was less convinced by the argument with regard to supervision.

In addition, allowing local markets to develop, including through their proprietary practices, could lead to national differences that might hamper the construction of the single market.

Chair Ross also said that long-term savings products targeting households would need to be simple, affordable and moderate in terms of risk. In its proposals, AMAFI likewise suggests considering the risk involved in channelling savings to companies, but also the need for collective savings tools.

AMAFI is sharing part of these messages within the European Forum of Securities Associations (EFSA), for which it is providing the secretariat for 12 months. EFSA in turn recently passed on its recommendations for developing the Capital Markets Union (AMAFI / 24-20) to the European institutions. The forum was given the opportunity to present its proposals to one of the European Commission’s directorates, as part of an EU competitiveness report being prepared by Mario Draghi and scheduled for release by the end of June.