The EU should shift its focus from financial stability towards growth, according to Lord Hill, UK Commissioner for Financial Stability, Financial Services and Capital Markets Union.
Speaking to a UK House of Lords committee on Tuesday (3 February), Lord Hill said that having struck the balance in favour of financial stability following the financial crisis, it was now time to pursue growth, even if it involved taking risks.
“Nil risk means nil growth. I don’t want the stability of the graveyard,” said Hill.
“The challenge is not to rip up everything we’ve learnt,” said Hill, “but to ask where we should come down on the scale between stability and growth. It’s important to keep asking these questions.”
Capital Market Union
Hill told the Lords he was confident that the building blocks would be in place by the end of his mandate in 2019.
The original call for capital market union came in the Treaty of Rome, 50 years ago. Capital market union would make is easier for savings make in one country to be invested in another member state. Progress on capital market union was called for by the governor of the Bank of England, Mark Carney last month who said it would stimulate growth and help share risk across the eurozone.
According to Hill there is a “strong wind of support” among member states for such a union. But he accepted questions of harmonizing tax laws to ease capital flows risked dragging the project into “dangerous political waters.”
Hill confirmed that the Commission would seek the inclusion of a strong regulatory framework within the Transatlantic trade negotiations, but said it was not his approach to unleash a “new wave of legislation”, saying prescriptive rules risked making companies less responsible for their actions.
“I want to be in a position where I can champion the contribution that financial services industries make to the European economy,” Hill told the Lords. “It’s not healthy that they’re thought of as being separate to the mainstream economy and still are being, in some ways, seen as having some kind of pariah status. I don’t think that’s good for the overall economy or the industry.”
Lord Hill will publish a Green Paper laying out his proposed reforms on 18 February.
Jonathan Hill, the EU's new financial services commissioner, announced he will set out his plans for a pan-European capital market by the middle of 2015.
The objective is to create an integrated market for raising money through bonds, shares and other financial instruments over the next five years.
Officials say a capital markets union would also mean the EU moving beyond public subsidies and loans to coordinate financing for companies and infrastructure through project bonds, public-private partnerships and infrastructure funds.
Hill said his first steps would be to push a proposal for European long-term investment funds for infrastructure and businesses, to develop a framework for securitisation and to carry out analysis of private placements - the sale of securities to a small number of chosen institutional investors.
- May 2015: UK general election
- By summer 2015: Jonathan Hill expected to lay out plans for Capital Markets Union (CMU)