Britain’s nominee for EU finance chief would seek to improve smaller firms’ access to capital via a pan-European credit market, helping them reduce their reliance on banks.
Jonathan Hill, who will face his second hearing at the European Parliament on Tuesday (6 October), said in written replies to EU lawmakers that he wanted a capital market union by 2019 “to help foster funding for small- and medium-sized companies and long-term projects.”
He also said there was no consensus for eurozone countries to jointly issue debt.
A common European framework for companies to raise capital would aim to establish the kind of funding offered by US corporate bond markets.
“We need to act now […] Our stock markets, equity markets and venture capital markets are substantially undeveloped when compared with comparable economies,” Hill wrote in a 26-page reply that he hopes will convince MEPs to support him.
Mainstream European credit markets have yet to fully recover from the financial crisis, with the banking industry remaining particularly reluctant to lend to smaller firms at competitive rates.
Hill faced a three-hour hearing last week, with lawmakers questioning the wisdom of allowing a former business lobbyist to control EU policy over a sector where London has interests at odds with Brussels.
The British nominee was asked for concrete ideas about the capital market union he has been asked to create by the incoming president of the new European Commission, Jean-Claude Juncker.
Hill said he would seek to develop a European market for financial instruments including private placements – the sale of securities to a small number of chosen institutional investors – and securitisation, or packaging loans into bonds.
He said he would come forward with a plan next year.
But Hill also said he saw no support across the 18 member eurozone for sharing sovereign debt liabilities in the form of euro bonds. Germany, and some northern allies, fear that euro bonds, backed by all eurozone states collectively, would mean an increase in the very low borrowing costs they currently enjoy.
The new Commission, the EU executive, is due to take office on 1 November.