Sunday 25 February 2018

EU favours insurers, private equity - 'capital markets union' plan

Jean Claude-Juncker
Jean Claude-Juncker

The trillions of euros held by insurers will be a core target for the European Union's "capital markets union" plan to invest more in companies and infrastructure, an EU document shows.

The bloc's financial services chief Jonathan Hill is due to publish his "action plan" on Sept. 30 for putting in place the basics of a capital markets union by 2019.

The aim is to improve European firms' access to financing and to release more funds for investment to spur growth after years of stagnation in the 28-nation EU.

Europe has long looked enviously across the Atlantic to the far deeper U.S. capital market while the old continent relies on banks for most investment in companies, made harder since the financial crisis rocked lenders.

A draft of the action plan, seen by Reuters, lists the steps Hill intends to take, many of them already well aired, such as easing capital charges on high quality securitised debt based on pools of mortgages and other loans.

"There is no single measure that will deliver a Capital Markets Union. Instead there will be a range of steps whose impact will cumulatively be significant," the document said.

The action plan pledges a swift revision of the EU's Solvency II insurer capital rules, which are not due to take effect until January.

The revision will make capital charges on investment in infrastructure less burdensome and Hill also plans a review of capital charges on banks' exposures to infrastructure.

"The Commission will also undertake a study on discriminatory tax obstacles to cross-border investment by life insurance companies and by pension funds and, where necessary, will initiate infringement procedures," the document said.

Hill will also propose next year a new framework for venture capital funds and consider tax incentives for the sector in the following year.

The Commission will study the possibility of a new breed of "simple and competitive" personal pensions in the EU.

In a bid to encourage small investors to buy more shares, bonds and pensions, Brussels will boost competition and bring down fees in the retail sector.

There will also be a broad review of all the new financial regulations introduced since the 2007-09 banking crisis to check their cumulative impact on investment, the document said.

The proposals include creating a pan-EU framework for covered bonds, and a pledge to propose by the end of 2017 a long-delayed draft law on legal certainty for ownership of securities like shares.

Banks have complained that switching the focus to markets could hinder their ability to continue lending to companies.

The action plan talks of enhancing the capacity of banks to lend, such as by easing capital charges on securitised debt.

Credit unions or local savings and loans organisations, could also benefit from not having to comply with the tough capital requirement rules written for banks, the document said.


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