EXCLUSIVE: The Commission is set to test the waters on creating a new super-regulator for capital markets, despite opposition from the larger member states when it publishes a green paper later this month.
The consultation on Capital Markets Union (CMU) will also consider harmonising the market for covered bonds, securitisation and creating a single accounting standard for smaller companies, according to a draft seen by EURACTIV.
The paper will be published later this month by Jonathan Hill, the Commissioner for Financial Stability, Services and CMU, and will underpin a concrete proposal to be published at the end of the summer, designed to make it easier to raise funds for the bloc’s flagging economy through markets, rather than banks.
The consultation will concern London – the EU’s largest securities market – where there are fears that discussion of a powerful EU regulator overseeing the City of London could stoke Euroscepticism ahead of May’s general election.
Harmonising financial products under review
“Do you think that the powers of the European supervisory authorities (the national bodies that oversee the sector) to ensure consistent supervision are sufficient? What additional measures relating to national or EU level supervision would materially contribute to developing a capital markets union?” the green paper asks. Questions about EU level supervision encompass the potential for super-regulation.
The issue is posed despite a senior Commission official recently dampening speculation on the issue.
“Of course at some point in time in the development of capital markets in Europe, supervisory issues will pop up. Frankly, we are far from this point,” Olivier Guersent, a senior civil servant in the EU executive’s capital markets union directorate told Brussels-based think tank Bruegel last month (21 January).
France, Germany and the UK all opposed the idea of a super-regulator, Guersent said.
Nemat Shafik, Deputy Governor of the Bank of England, told the seminar that the obstacle to setting up a CMU was not primarily institutional, meaning there is no need for a new regulator.
Elsewhere the paper says that the EU executive “will consult in 2015 on the merits and shape of an EU covered bond framework and present a range of policy options to achieve greater integration in covered bond markets”.
Single accounting standard in the pipeline?
It also points to the need for an EU wide initiative “to ensure high standards, legal certainty and comparability across securitisation instruments through a higher degree of standardisation of products.”
Covered bonds – guaranteed by assets such as mortgages – and securitisation, a process of pooling assets such as mortgages to create investment products, have both slumped in Europe in the wake of the financial crisis.
The green paper also touts the idea of creating a single accounting standard for smaller companies.
The development of a “simplified, common and high quality accounting standard” tailored to smaller companies could help make them more attractive to cross-border investors, the paper says.
Jonathan Hill, the EU's new financial services commissioner will publish the green paper to consult on his plans for a pan-European capital market, which he will publish at the end of the summer.
The objective is to create an integrated market for raising money through bonds, shares and other financial instruments over the next five years.
- February 2015: Jonathan Hill to publish green paper and launch public consultation on Capital Markets Union (CMU)
- By summer 2015: Jonathan Hill expected to lay out plans for CMU
- Banking and finance
- Directorate-General for Financial Stability, Financial Services and Capital Markets Union (DG FISMA)
- EURACTIV France: Une autorité de régulation financière européenne pourrait voir le jour
- EURACTIV Germany: Kontrolle der Kapitalmärkte: Kommission erwägt Super-Regulierungsbehörde