The EU turns to
stock and bond markets this week with reform proposals intended to help
companies raise the cash needed for growth-boosting investments, hoping
to emulate the more active capital markets of the United States.
Jonathan Hill, the EU's
financial services chief, will on Wednesday set out possible reforms to
create a capital markets union (CMU), eliminating national rule
differences to help markets complement bank lending in doing the heavy
lifting involved in raising money for the economy.
The region depends on banks for 75 percent of funds to grow companies, with only a quarter raised on markets, making it vulnerable to ebbs and flows in the availability of bank finance, whose unpredictable nature was shown when it dried up in the financial crisis of 2007-09.
Hill will list ways to encourage more financing from private placements or companies directly tapping select investors; boosting securitization, or selling bonds based on a pool of loans like mortgages, and making it cheaper for small companies to list on stock markets.
He wants "quick wins" by 2019 that don't involve protracted lawmaking, as Brussels seeks to show it is doing all it can to create more jobs and growth for the EU's 500 million citizens.
Given the City of London is the EU's top financial market, this should be good news for its activities, but some fret it could be a double-edged sword.
The inclusion of "union" in the project's name, conjuring up more European integration, has raised suspicions that a new EU super-regulator is part of the plan, something Hill's officials have denied. Others fret it could get bogged down as other regulatory demands come out of the woodwork.
"The worry is that this becomes a Christmas tree and everyone will want to put their own decorations on it and then we lose sight of what we are trying to do," said Mark Boleat, policy chief at the City of London.
"The objective must be better, more efficient operation of capital markets by removing barriers," Boleat said.
The region depends on banks for 75 percent of funds to grow companies, with only a quarter raised on markets, making it vulnerable to ebbs and flows in the availability of bank finance, whose unpredictable nature was shown when it dried up in the financial crisis of 2007-09.
Hill will list ways to encourage more financing from private placements or companies directly tapping select investors; boosting securitization, or selling bonds based on a pool of loans like mortgages, and making it cheaper for small companies to list on stock markets.
He wants "quick wins" by 2019 that don't involve protracted lawmaking, as Brussels seeks to show it is doing all it can to create more jobs and growth for the EU's 500 million citizens.
Given the City of London is the EU's top financial market, this should be good news for its activities, but some fret it could be a double-edged sword.
The inclusion of "union" in the project's name, conjuring up more European integration, has raised suspicions that a new EU super-regulator is part of the plan, something Hill's officials have denied. Others fret it could get bogged down as other regulatory demands come out of the woodwork.
"The worry is that this becomes a Christmas tree and everyone will want to put their own decorations on it and then we lose sight of what we are trying to do," said Mark Boleat, policy chief at the City of London.
"The objective must be better, more efficient operation of capital markets by removing barriers," Boleat said.
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