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Simon Lewis, Chief executive of AFME, said: “We strongly support the creation of a Capital Markets Union as it aims to create jobs, restart growth and investments and improve the functioning of the financial sector in the EU. High unemployment and weak recovery means that many EU citizens face uncertain prospects and many businesses lack the confidence to invest. The Capital Markets Union initiative can address these challenges and AFME believes that a combination of industry initiatives, the removal of regulatory barriers and new regulations can make lasting change.”
AFME suggests 5 overarching priorities:
· Building an equity culture to develop entrepreneurship, business growth and new jobs
· Improving the market ecosystem to better serve companies at different stages of growth
· Preserving necessary market efficiency and liquidity
· Tackling market fragmentation in Europe and internationally
· Supporting the Commission’s ‘Better Regulation’ approach to produce better policy outcomes
The CMU project will be most effective if it is informed a robust impact assessment and a clear analysis of market failures, in line with the EC “Better Regulation” agenda. AFME urges the EC to keep in mind the possible impact on the development of CMU in its review of EMIR, CRR, the ESAs framework and the shareholder rights directive. AFME also highlights the clear risk that proposals such as bank structural reform and the FTT may undermine the potential economic benefits of CMU.
However, to unleash the full potential of European capital markets AFME believes that work on essential pieces of the CMU jigsaw, such as insolvency law and securities law reform, needs to start early as it will take longer to achieve progress. The consultation is a clear indication that the Commission recognizes the positive benefits of securitisation for the functioning of the financial markets and supports the rehabilitation of “qualifying securitisation” so it can play a key role in CMU.
AFME fully supports sensible disclosure and the Joint ESAs’ calls for greater harmonization and consistency, especially across different types of investors. However, our members are very concerned by new proposals which are intrusive, unnecessary and risk damaging both confidentiality obligations to customers and legitimate commercial interests in proprietary know-how such as credit scoring. Also, in mandating new qualitative as well as quantitative disclosure requirements, they create uncertainty around liability under securities laws, and cross the line between the information and tools that it is reasonable and legitimate for an issuer to supply, on the one hand, and the due diligence and critical analysis that an investor should undertake, on the other.