The paper is set to call for a balance between the need for long-term investment capital on the one hand versus future capital requirements in Solvency II and proposed new rules for IORPS. The draft also questions the role of fair value accounting and raises the need to promote securitisation markets, while also floating the idea of a European retail savings account to fund long-term investment projects and seeking to promote better corporate governance. The draft highlights that pension funds' ability to function as long-term investors depends on the time horizon for investment decisions, and on their ability to generate high investment returns.
Additionally, the draft cites the need to "stimulate" securitisation markets to convert illiquid assets into tradable instruments and reduce the reliance on bank funding, and covered bond markets, which remain fragmented across Europe. It highlights the European project bond initiative, which aims to develop a liquid bond market.
It also refers to tax rules. While it argues for further discussion on the design of corporate taxes that currently favour debt over equity issuance, it also argues that the financial transaction tax (FTT) should incentivise long-term investment. It says the FTT could indirectly support long-term financing by penalising undesirable and speculative short-term financial market transactions and instead incentivising longer-term horizons.
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