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On 9 October the Next CMU High-Level Expert Group (HLEG) - composed of experts from Germany, France, the Netherlands, Italy, Spain, Poland and Sweden who are charged by their ministers with analyzing the EU’s market-based financing capacity five years after the launch of the Capital Markets Union (CMU) - published its final report on the CMU, entitled “Savings and Sustainable Investment Union”.
BETTER FINANCE, as the representative of EU Citizens as Savers, Investors and Financial Services Users, was heard by the HLEG on the 7th of July 2019 and significantly contributed to the debate, shared relevant research and provided evidence-based policy recommendations. We are therefore pleased to see that the final HLEG report took BETTER FINANCE input into account and has adopted and endorsed some of the BETTER FINANCE policy recommendations with view on the future development of a CMU, especially since just 3 out of the 182 contributions (1.6%) came from consumer representatives.[1]
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Next CMU Final report: Input Weighting |
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International organisations |
2 |
1% |
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EU bodies |
9 |
5% |
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National authorities |
26 |
14% |
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Ministries |
10 |
38% |
5% |
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Central Banks |
6 |
23% |
3% |
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Supervisors |
8 |
31% |
4% |
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Other |
2 |
8% |
1% |
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Stakeholders |
145 |
80% |
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Industry |
123 |
85% |
68% |
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Consumers |
3 |
2% |
1.6% |
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Think Tanks |
3 |
2% |
2% |
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Academia |
3 |
2% |
2% |
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Other |
13 |
9% |
7% |
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Total |
182 |
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Source: BETTER FINANCE, based on the Report
Whereas BETTER FINANCE has always been a strong proponent of an efficient CMU with EU households at its heart, the idea has too often been dominated by financial stability concerns, at the expense of consumer protection and EU citizens in general.
What’s more is that the Commission’s CMU flagship seems to be at risk of having the wind taken out of its sails by the latest tendency to put “Sustainable” Finance initiatives first. Whereas BETTER FINANCE firmly believes that it is essential to promote a cleaner and fairer economy, this should never happen at the expense of long-term and pension savers.
It is with a sense of relief then that BETTER FINANCE notes that the HLEG report addresses these concerns head-on, stating that European capital markets have now sufficiently recuperated and stabilized for CMU efforts to now pass on to the next stage and focus on EU citizens and SMEs.
Many of the research findings and policy recommendations championed by this report resonate with proposals put forth by BETTER FINANCE since many years, including those developed in our contributions to the HLEG report. The report is also significantly aligned with our Key Priorities for 2019-2024, including the need for “better, cheaper, and simpler investment products”, a focus on “long-term equity financing”, simplified ”access to the public markets for SMEs and Mid-Caps” and a “reassessment of the regulatory and supervisory balance”.
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Next CMU High-Level Report |
BETTER FINANCE Research papers & publications |
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Findings |
Recommendations |
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“recommendations aim at strengthening […] to finance […] the EU economy, its growth and job creation” |
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“citizens’ savings are held in short-term financial savings products which creates a predictable mismatch with their long-term saving needs” |
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A true CMU “should improve returns on long-term savings” and should “provide diversified funding options for the real economy” |
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“EU investors’ overall participation in capital markets is relatively low” |
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“There is a need for better, cheaper, and simpler investment products” |
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“Start-ups and SMEs need investors that accompany them in the long run through long-term equity financing” |
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“Citizens’ long-term pension savings can significantly reduce the future economic burden of pension provision on taxpayers and governments’ budgets under pay-as-you-go pension systems” |
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The development of private voluntary pension savings can be done “as well as tax and financial incentives” |
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“Retail investor confidence in financial markets remains relatively low” |
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“Incentives and robust investor protection for retail investors include: Transparency on costs, performance, and fees” |
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“Incentives and robust investor protection for retail investors include: […] a minimum harmonised tax incentive for general savings in simple and transparent long-term financial instruments like single shares and ETFs” |
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“Incentives and robust investor protection for retail investors include: […] sufficient and easy digestible information about investment opportunities” |
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“Incentives and robust investor protection for retail investors include: […] fair advice” |
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“Incentives and robust investor protection for retail investors include: […] promote financial literacy” |
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“A practical EU-wide taxonomy should be completed as soon as possible” |
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“The European Commission should […] trigger […] set of high quality non-financial reporting standards with international reach” |
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“The EU should facilitate further use of such investment vehicles for employees” such as “employee shareholder plans” |
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“Significantly simplify access to the public markets for SMEs and Mid-Caps”; “simplify Market Abuse and Prospectus applicable rules”; “the Market Abuse Regulation (MAR) regime simpler”; “Prospectuses easily digestible for investors and cost-efficient to produce for companies”; “Encouraging SMEs and Mid-Caps to list on regulated markets”; |
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“Strengthen incentives for institutional investors to hold more equity”; “an adapted Solvency 2 framework”; |
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Strengthen supervision across the EU and the powers of ESMA “if the market at stake is highly integrated (standardised product […]”; “Reassess the regulatory and supervisory balance” |
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“Ensuring consumers’ and investors’ trust in Digital Finance” |
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“Establish a single market data Consolidated Tape” |
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High Net Worth – “MIFID rules led to an overprotectiveness of investors regardless of their experience. Experienced investors should be able to act as semi-professionals and should be able to opt out of the high protective mechanisms introduced for inexperienced investors” |
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[1] Contributions also include those of BETTER FINANCE’s Polish member, Stowarzyszenie Inwestorow Indywidualnych (the Association of Individual Investors in Poland) - https://www.sii.org.pl/
