French report pushes for early creation of Capital Markets Union

Manuel Valls received the investment report on 27 August. [Fondapol/Flickr]

François Villeroy de Galhau, formerly the deputy CEO of BNP, has submitted a progress report on his investigation into investment to the French government. La Tribune reports.

The message of the report, delivered to the French prime minister by François Villeroy de Galhau on Thursday 27 August, was that investment finance for innovative businesses was indispensable to generating solid and sustainable economic growth.

The ex-deputy CEO of BNP Paribas and former French finance minister was charged with writing the progress report in April.

In this first assessment, François Villeroy de Galhau focused on what he called a “central challenge”: to reconcile “increasingly innovative (and risky) investments, a high but sensible level of saving and a financial system that has become more secure” since the 2008 financial crisis. He hopes that French banks will take “resolute action to end the persistent misunderstanding” with businesses, by improving their access to cash loans.

>> Read: France wants EU’s Capital Markets Union to back ‘European champions’

The ex-banker also argued that some of the €1,600 billion currently invested in life insurance funds needs to be channelled back into the real economy.

The wrong kind of savings

The question of badly placed savings is an important one in the eurozone. The EU’s “annual current account surplus of €200 billion” is poorly positioned to act as a buffer against national shocks.

More generally, the former finance minister sees the future Capital Markets Union as a potential answer to this problem. He would like to see it introduced in 2016 or 2017, ahead of the European Commission’s target date of 2019, and re-branded as the “Financing and Investment Union”.

>> Read: EU finance ministers asked to set Capital Markets Union priorities

“This will offer companies real diversity in their sources of finance,” he explained; something he believes is “imperative” for the 19 countries of the eurozone, in order to “better direct savings […] in the long term, in view of their growing need for pensions”.

Allowing insurers to make risky investments

François Villeroy de Galhau also said the recommendations of the Solvency 2 Directive, which discourages insurers from making high risk or long term investments, should be reconsidered. He suggested that Europe should address the subjects of bankruptcy, economic information on SMEs and the protection of consumers.

This article is also available from EURACTIV France.

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