07 June 2013

Commissioner Barnier: Financial regulation - Laying sound foundations for stability and growth in Europe

Barnier's speech at the Economic Ideas Forum in Helsinki was entitled "Banking sector, finance and regulation: a strong pillar for the real economy". 

As I see it, financial regulation is not just a pillar. It is the entire foundation for the recovery of our economy. There are two reasons for this:

Firstly, we need financial regulation to restore stability. And protect workers and taxpayers from another financial crisis.

And secondly, we also need financial regulation to spark growth. By ensuring that households, SMEs and local authorities get the financing they need.

The challenge here is to achieve stability and growth at the same time.

This raises three questions:

• Can we transform the financial sector in a smooth way? And avoid the bumpy ride that we had in Cyprus?
• Can we achieve stability without hampering growth?
• Can regulation even actively contribute to fostering new investments? And plant the seeds for new growth in Europe?

To question 3:

Fortunately, we have strong assets in Europe – including high levels of private savings and foreign investment. Yet many factors are holding back long-term investment. These include:

• general corporate risk aversion;
• a lack of confidence of both savers and investors; and
• scaled-back bank lending to the real economy.

We need to change this situation. Banks will continue to play an important financing role in Europe. But we need to ensure a more diversified system.

First, we need greater involvement of institutional investors. Such as insurance companies, pension funds or development banks. As a complement to commercial banks.

Second, we need more direct capital market financing. Our revised MiFID Directive will, once adopted, strengthen capital markets. We must also think of ways to develop bond markets in Europe as an alternative to bank loans. And ask ourselves how to revive the securitisation market. Without compromising financial stability.

Third, we need to look at cross-cutting factors to encourage long-term saving and financing. Like tax incentives for long-term investment. Or specific saving tools at the EU level.

Last but not least, we need to facilitate SMEs’ access to financing. European venture capital funds will help to raise capital from investors and support start-ups all over Europe. We need to find other ideas like this one.

On these four key issues, our Green Paper on long-term financing has launched a public debate. I encourage all of you to participate in our public consultation. It is by working together that we will find the best ways of encouraging long-term investment. And that we will ensure that the new financial regulation will not only restore stability and avoid the next crisis but also foster growth in a proactive way.

Full speech

© European Commission