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[...] Lord Hill’s proposals, approved by the commission on Thursday, would widen “passporting” rights first given to the venture capital industry in 2013. Passporting aims to help funds located in an EU country grow by giving them free rein to seek investment all over the bloc — and, in turn, to give companies seeking financing an alternative to risk-averse banks. [...]
According to EU data, the 2013 move has so far failed to deliver. Venture-capital markets in Europe have essentially been flat since 2009 and the average fund size is around €60m, about half the US figure. If the EU market had been as big as its US counterpart in recent years, an extra €90bn of finance would have been available for companies between 2009 and 2014, the commission estimates.
The current EU venture capital rules strictly limit which funds could qualify for the passport — and Brussels fears these restrictions have acted as a straitjacket. EU officials say weak lending on the part of banks has added to the urgency to address the issue.
“We need European businesses to have more choice of funding and to be able to attract the investment they need here in the EU,” Lord Hill told reporters on Thursday, adding that the plans were representative of the broader agenda he had hoped to pursue in Brussels.
The proposed changes would allow larger, more diversified fund management companies, such as BlackRock and Pimco, to set up passport-eligible funds. Under the current rules, asset managers cannot use the passport if they are already regulated under a separate EU law on hedge funds — a barrier that rules out many firms.
The plans would also expand the range of companies in which the funds can invest, doubling the maximum number of employees such companies can have from 250 to 499.
The commission added that it would stop EU countries’ national regulators trying to charge fund managers for market access, a practice that should have disappeared with the creation of the passport. Such fees, which can be as much as €3,000 per year, would be “explicitly” prohibited, the commission said. [...]
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