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The speed of the recovery is slower than we would like. And if the greatest threat to financial stability in the past was the financial crisis, now I believe it is the lack of jobs and growth. That is why, like the Commission as a whole, I will think about what I do through that prism.
So, fewer new legislative proposals in future. More focus on bedding-in the major reforms of recent years and seeing that they are properly implemented. Thinking about the cumulative effect of different pieces of legislation and checking that there have been no unintended consequences on investment. Making sure that legislation is proportionate and takes into account the different business models we have in our diverse financial landscape.
I don't want to burden smaller, lower risk institutions with the same requirements we need for bigger, riskier ones. This approach follows steps that the Commission has already taken. So, in the Capital Requirements Regulation, we adapted some of the international rules to take into account the specific circumstances of saving and cooperative networks, and to make it more attractive to make loans to SMEs. We took a similar approach in the recent liquidity coverage ratios where we again sought to reflect the different banking systems across Europe.
Looking ahead, I am keen to build on this policy of differentiation. For instance, we will need to decide by the end of 2016 whether we should introduce a binding leverage ratio or ratios in the EU. We will also need to assess the impact of net stable funding ratios on the diversity of business models in the European banking system. In both of those areas, differentiation would be crucial. Beyond that, we will need to see that the Financial Stability Board's Total Loss-Absorbing Capacity guidelines are coherent with existing EU rules in the Bank Resolution and Recovery Directive.
We will also need to complete the work started in the last Commission to make the financial system stronger and more stable. The building blocks of the Banking Union are there, but to be effective, Member States need to put the rules into effect. There are also some proposals which are still being considered by the co-legislators, notably on Money Market Funds, benchmarks and structural reform: I hope they can be concluded swiftly, both to avoid regulatory uncertainty and to strengthen financial stability. My approach to those negotiations will be pragmatic: I want agreements that deal with the sources of risk, but do not impede financing of the wider economy. One new legislative proposal I will make is for an effective resolution for non-bank financial institutions, and for clearing houses in particular. Having concentrated activity into these large, financial infrastructures, we need to make sure we have a framework in place (as there is for banks) to manage their recovery or default.
I also want to think more about how we can deliver benefits from a single market in financial services directly to consumers. To think about financial services from their point of view and identify barriers which prevent them from benefiting from better competition. In the coming months, I will be launching a consultation seeking to understand the barriers that persist within the Single Market and how we might help to give consumers access to more products, better services and keener prices.
Capital Markets Union
The third new direction I mentioned is building a single market for capital: a Capital Markets Union.
Free movement of capital was one of the four fundamental principles on which the European Union was built. So in some ways this is a familiar direction. But I do believe we have a new opportunity to make progress and get capital markets working better. If we can do that, the prize would be considerable.
Just to take one example: if our venture capital markets were as deep as the US, as much as 90 billion euro more in funds would have been available to companies between 2008 and 2013. Think of the innovation, the new services, the new jobs that could have been created if that funding had been there, businesses that could have developed and grown in Europe rather than being developed and grown in the US.
A single market for capital would make Europe more attractive to inward investment. It would create more financing opportunities for SMEs and infrastructure projects. It would encourage more long-term investment. Europe of course already has a financial network; but now it needs better connections to make that network become faster, more developed and more efficient.
Capital Markets Union is about complementing the role of banks, not displacing them. In some countries, in some markets, bank financing is working well. But in others, it is not. Where banks are not lending, our start-ups and our SMEs are struggling. And in all countries, more options for financing at different stages in the life-cycle of a business could help boost growth.
Financing of long-term investment
My starting point will be to try to make existing markets work better, to take a number of pragmatic, incremental steps to get funding to where it is needed most: to long-term investment projects, for example to infrastructure and to our SMEs.
Let me say a word about what I hope to see emerge in the coming years on each of these.
With the support of the ECB and the Bank of England, we want to get the market for securitisation going again in Europe. This could make a real difference to long term investment by broadening the investor base to include more long term investors such as insurers and asset managers. To do it, we are looking at how we could set up a framework for the development of an EU market that singles out a category of highly transparent, simple and standardised products.
We also want to support institutional investors to invest in long-term projects. I do not think that it is for governments or indeed European institutions to try to force such a change. But we do think that there is a role we can play in supporting such developments - for instance, insurance companies were given a number of incentives to invest for the long term in the detailed rules introduced for Solvency II last October.
We could also step up efforts to create a single market for personal pensions – a 29th regime - which would help mobilise more personal pension savings for long-term financing.
As far as banks are concerned, many of the detailed rules implementing the capital requirements take into account the needs of long-term finance. But we will produce a report under the review of the Capital Requirements Regulation to assess how appropriate the existing rules are.
Private placements have the potential to offer investment opportunities to long-term investors, and could broaden the availability of finance for infrastructure projects. A group of industry bodies recently launched an initiative to encourage the development of the European private placement industry. I very much welcome that, not least because I do not think that we always have to reach for legislation as a first option.
Financing of infrastructure
The Capital Markets Union also gives us a framework within which we could make a difference to our infrastructure, to the roads, the bridges, and the broadband networks that connect our continent. It can do this by providing incentives to institutional investors to put their money in infrastructure.
Two examples of things we are doing:
First, the European Long Term Investment Funds or ELTIFs provide an ideal vehicle to provide this type of incentive, both for the new European Fund for Strategic Investment and for insurers. The European Parliament agreed to ELTIFs recently and I want to see ELTIFs up and running as soon as possible.
Second, the work of the task force on the investment plan will help increase the transparency of infrastructure projects, which should make it easier for investors to identify strong projects in which to invest.
Our intention is to make amendments to the detailed rules on Solvency II in both these areas, that is to make provision for ELTIFs, and to give insurers more ways of getting involved in infrastructure projects.