01 May 2015

ABBL views on the Capital Markets Union

Although the Luxembourg Bankers’ Association (ABBL) believes the idea that a diversification of funding sources is necessary, it stresses that banks shall remain central to the financing of the economy, so it is concerned that some regulatory and tax initiatives might work against this objective.

The EU Commission has issued three documents: a Green Paper, a consultation on the Prospectus regulation and a consultation on the creation of a pan-EU framework for securitisation.

First and foremost the review of regulations issued over the last years is essential to ensure that they do not hamper economic development. The aim is to create a true pan EU market for financing the economy, addressing issues such as securities rights, organisation of markets, enhancing coordination between authorities. Capital Markets Union (CMU) intends to create a securitisation market especially aimed at SMEs allowing them to access other sources of financing than banks. It also seeks to place banking and finance in the 21st century by developing digital services. And finally it is a change of spirit both at EU Institutions and at EU business level becoming more pragmatic.

Starting the 13th May 2015 the EU Commission will analyse the responses to the three consultations. It shall propose regulations for the 2 technical files: the Prospectus regulation and Securitisation framework, because these issues are well identified, well known the securitisation has the support of the ECB.

The Green Paper serves as the regulatory agenda and trendsetter for the EU Commission’s work plan over the next years. It will be translated into a formal White Paper in which the EU Commission will present how to build the financial eco-system that the EU needs. This paper should be publicised in fall 2015.

The ABBL welcomes this initiative taken by the Junker Commission and is supports the objective to stimulate growth. Although the ABBL believes the idea that a diversification of funding sources is necessary, it would however like to stress that banks shall remain central to the financing of the economy. Therefore the ABBL is concerned that some regulatory and tax initiatives currently being considered might work against the objective of developing efficient market-based financing. Notably the Financial Transaction Tax (FTT) or the MiFIR transparency requirements for non-equity trading should be mentioned at this point.

The ABBL believes that the consultation launched by the EU Commission is an opportunity to look back at the measures which have been adopted over the past few years with the political aim to ensure stability of the financial sector and the economy at large and check the proportionality of certain of these measures as well as the cumulative impact these measures had and will have on growth.

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