The Alternative Credit Council (ACC) welcomes the final report of the European Commission’s High-Level Forum on the Capital Markets Union and its recommendation to reform the European Long Term Investment Fund (ELTIF) Regulation. Expanding capital markets in Europe is more important than ever and we applaud the determination of policymakers in pursuing this agenda.
European businesses often lack access to the capital they need to scale and grow. This has been exacerbated by the COVID-19 pandemic and therefore makes access to all forms of non-bank finance all the more urgent. The ELTIF vehicle has many positive features, such as the ability to originate loans on a cross border basis. However, it also suffers from a number of deficiencies which have so far hindered a broader take up by investors and asset managers alike.
One of the key findings from the ACC’s most recent Financing the Economy research was that while half of private credit managers expect to grow the amount of capital they invest in European businesses over the next three years, Europe also has the highest barriers to non-bank lending in the world. This means the amount of capital deployed will continue to be below the real potential unless the non-bank finance regulatory infrastructure changes.
The ACC has published a position paper that puts forward a number of detailed reform proposals that could make the ELTIF vehicle a globally attractive option for pooling and investing private capital in Europe’s companies. These same businesses not only require funds to fuel their recovery from the current crisis, but also need significant long-term investment as they transition to more sustainable models. Reforming ELTIF will help them overcome these challenges.
Jiri Krol, Global Head of the ACC commented: Nurturing capital markets requires a combination of political ambition and targeted policy interventions. The endorsement of ELTIF reform in the High Level Forum’s report is a welcome sign of ambition as well as recognition that non-bank lenders have to play a major role in Europe’s financing mix. As policymakers take forward this mandate, it is essential that this leads to practical reforms to unlock ELTIF’s potential which will, in turn, result in finance flowing more easily from investors to European businesses.
