As Europe gets ready to unveil its Capital Markets Union plan next week, Financial Services Commissioner Jonathan Hill said he wants bank to play a “pivotal role”.
Speaking at the European Banking Federation’s annual conference on Thursday, Hill stressed that the so-called CMU “will complement, not replace bank funding”.
“The banking system makes a vital contribution to Europe’s economy, to local communities and I want to keep it that way. Developing capital markets is a way of complementing existing sources of bank funding, not replacing them,” Hill said.
The proposal aims to create a more integrated capital markets across the 28 nation bloc by reducing fragmentation in financial markets, diversifying and improving access to finance for businesses.
EU bankers meeting at the conference in Brussels downplayed industry’s fears that the proposal will damage the sector.
“The initial fear of the Capital Markets Union was wrong, because banks have the knowledge and the professionalism to provide costumer experience. CMU is about equity finance. And banks have the knowledge to bring people and businesses who require equity to equity providers. So we are a competitor there. So we need to design our business model in such a way that we can also bring together clients and providers of equity,” said European Banking Federation Chief Executive Wim Mijs.
The Conference also discussed how the banking sector will adapt to the new digital era. The European Banking Federation presented a blueprint on Digital Banking and called for banks to be a centerpiece in the EU’s Digital Single Market.
Hill also promised to regulate the industry in a ‘proportionate’ way, but warned that “the age of irresponsibility is over.”
“I cannot promise you an end to regulation, as I set out there is much that we still have to finalise. What I can promise is to take an approach that can be proportionate, that is mindful to the impact that legislation can have on your competitiveness, and that leaves the door open to review legislation once it is adopted.(…). I want a competitive banking sector that supports growth and benefits society, a diverse banking sector that operates within rules that are proportionate to risk,” Hill added.
According to David Wright, a former Commission official, bankers that misbehave should be punished with “tougher sanctions” and be sent to jail.
“People working in the industry have got to know that if they misbehave, or if there is massive scandal which they are part of, they are going to go to jail.
“We have got to have proper behavior in this industry, not just the banking industry, the whole financial industry. And if we do, confidence will come back, people will invest, banks will be able to lend, investors will invest, and the whole economy will be able to be financed in a much optimal way,” said David Wright, from for financial services policy at the DG Internal Market and Services.
European Commission President Jean-Claude Juncker has made the CMU one of his main priorities, in an attempt to reactivate Europe’s slow economy.