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ACCA calls for long-term financing solutions for sustainable economic growth
John Davies, head of technical at ACCA, says: "In responding to the task of enhancing growth and competitiveness, Europe faces significant long-term investment needs. ACCA supports the goal of creating a business environment which promotes a more long-term focus in planning and investment. This, however, cannot be achieved by disregarding the changing nature of public and private capital."
"The package adopted today by the Commission targets many issues important to ACCA, especially strengthening the financial capability of SMEs. Wider access to equity funding for the SME sector should be a fundamental element of any long term strategy. Incentivising citizens to save for their retirement is also, by definition, key to the adoption of a successful long-termist financial culture and it is important that Europe strikes the right balance between giving savers confidence that their saving will be safe and worthwhile and minimising obligations for employers", explains John Davies.
"We support efforts to encourage and push companies to adopt long-term strategies and have access to sources of funding which facilitate them. A communication on crowd funding is a promising regulatory reform to spur significant growth in SMEs’ access to alternative sources of finance. Today’s new rules make it a realistic prospect by ensuring that Member States standardise their treatment and do not create artificial barriers to entry. It is important to ensure that the rules for crowd funding are consistent with the aspiration of an integrated market for card, internet and mobile payments", adds John Davies.
"ACCA supports proactive initiatives to ensure an EU level-playing field in tackling issues of insufficient engagement of shareholders and lack of adequate transparency. It is of great importance to take into account best practice among the Member States and create a modern and efficient corporate governance framework that respects diverse business environments", concludes John Davies.
AFME: European Commission backs expanded growth role for capital markets
AFME welcomes in particular the Commission's acknowledgement of the important role to be played by Europe’s capital markets in funding Europe’s economic growth. AFME welcomes and supports the Commission’s commitment to revive securitisation in Europe, and in particular, to consider better regulatory treatment for high quality securitisation. Since 2011, Europe has been a global leader in important regulatory reforms of transparency and risk retention, which, along with industry initiatives such as Prime Collateralised Securities, have laid the foundations for sustainable securitisation markets which meet the needs of the real economy. AFME remains strongly committed to constructive engagement with the Commission and other policymakers to this end. It is essential that this further analysis takes account of the evidence of the strong performance of high quality securitisation in Europe.
Clare Francis, Managing Director & Head of Global Corporate Banking at Lloyds Bank, and Chair of AFME’s Long Term Growth working group commented: “As growth and financing of Europe’s real economy face structural challenges, enhancements to European capital markets would be a welcome development, with banks continuing to play a key funding role. For example, an ideal world would allow corporates to able to choose between fully-functioning euro, sterling and US private placement markets, all with similar conventions, documentation and standards. Although we are some way off from that, this EC paper is an important move towards that goal.”
Rick Watson, AFME’s head of Capital Markets, commented: “There is no question that European capital markets have a key role to play in fuelling long-term growth. In order to achieve this ambition, they need to be developed so that companies can more easily access them and that means a well developed capital markets policy; one which improves education for new issuers on how to most efficiently meet the needs of capital markets investors. The Commission’s paper represents a major step forward towards this goal by identifying areas where we can further develop Europe’s capital markets.”
EBF: Banks support European Commission plans for long-term financing
Long-term financing is key when it comes to encouraging economic growth. Long-term financing is also a complex topic with broad implications that requires targeted policy efforts such as those that now are being considered.
The EBF is pleased to see the Commission recognizes that banks will indeed continue to play a significant role in the financing of the European economy.
“The capability of banks to fund the real economy has been adversely impacted by new regulations.” said EBF Chief Executive Guido Ravoet. “Some provisions in the new capital regime for banks make securitisation more costly and capital intensive, whilst some elements of the new insurance rules make it less attractive for insurers to buy securitised products.”
"We are convinced that improved overall coordination of the new rules can benefit the economy, and we reiterate our call for a comprehensive impact assessment of all the new rules in relation to each other", said Mr Ravoet.
The EBF welcomes the greater emphasis that the Commission places on the longer-term financing of exports. Banks also welcome recognition of the importance of securitisation in the financing of the economy. The EBF is keen to work further with the Commission on the various initiatives, such as the Prime Collateralised Securities initiative (PCS), to revive high quality securitisation. EBF recalls that the performance of EU-originated securitised instruments has been exemplary with negligible credit losses in the wake of the crisis.
Insurance Europe stresses need for global coordination on initiatives
Insurers are ideally placed to contribute to the long-term investment and financing required to underpin economic growth, since they offer risk-transfer and long-term savings products and are able to invest long-term. Insurance Europe welcomes the Commission’s pro-active promotion of long-term finance, as evidenced by the actions and initiatives set out in today’s Communication.
“It is vital that EU initiatives on long-term finance are coordinated with international organisations, such as the OECD and the Financial Stability Board, on the work in this area that has been mandated by the G20, which Insurance Europe follows very closely", said Michaela Koller, director general of Insurance Europe.
One area covered in today’s EC Communication relates specifically to mobilising insurers as sources of long-term financing and, in particular, to the changes to EU insurers’ regulatory environment with the introduction of the Solvency II rules in 2016.
Work is currently underway to finalise the delegated acts that detail the Solvency II regulation. Insurance Europe has called on the Commission to ensure that the capital requirements on long-term assets reflect the true risks faced by insurers and likewise to ensure the appropriate treatment of the long-term nature of insurance products, so that insurers are not disincentivised from long-term investing. It therefore welcomes the statement in the Commission’s Communication that the delegated acts will include “a number of incentives to stimulate long-term investment”.
NAPF
NAPF’s Policy Lead: EU and International, James Walsh commented: “On a positive note, it is good to see the European Commission recognises the role of pension funds as long-term investors in the EU economy, but there is work to do on both supply and demand. On the supply side, the NAPF will encourage the EC to ensure its regulations incentivise long-term investing. Regarding demand, the EU must now work with national governments to ensure ready availability of projects that would attract long-term pension funding.”
TheCityUK
The Communication contains a number of actions that TheCityUK has called for and strongly supports. These include a review of the Private Placement Market across Europe, which TheCityUK believes has the potential to provide a much-needed additional source of funding for SMEs. TheCityUK also welcomes further action to promote the role of the European Investment Bank to support infrastructure projects through its Project Bond programme.
Infrastructure will be the foundation of Europe’s long-term growth prospects and the possibility of expanding the scope of the Project Bond beyond the Connecting Europe Facility is a positive development. Establishing a single portal for infrastructure projects in the EU, if adopted, could be valuable in helping investors identify potential projects. TheCityUK calls on the next European Commission to ensure that these ambitions become a reality.
TheCityUK has repeatedly highlighted the importance of ensuring that the existing regulatory regime does not prevent banks and insurers from providing finance to the economy. The Commission has acknowledged that these concerns will continue to be addressed in ongoing work on the Solvency II regime and the Capital Requirements Directive. The CitUK calls on the Commission to closely monitor this issue and assess the Solvency II delegated acts and the liquidity coverage ratio and net stable funding requirement once published, from the perspective of the impact on long-term investment.
This Communication comes near the end of the Commission’s current mandate and is an important contribution to the debate on how to promote growth in Europe. TheCityUK calls on the next European Commissioner for the Internal Market and Services to ensure that the actions contained in today’s Communication are adopted and that the next Commission promotes a regulatory climate supports long-term growth in the EU.