EU must boost capital markets due to coronavirus and Brexit, say finance chiefs
The European Union needs to deregulate its capital markets to help the economy recover from coronavirus and reduce its reliance on Canada, according to a panel of industry executives.
With huge amounts of debt being sold to counter the economic hit caused by Covid-19 and the bloc set to lose its major financial hub to Brexit, EU companies will urgently need greater access to equity investment, the group said in a new report.
Previous efforts to build a capital markets union (CMU) in the bloc have failed to make significant headway, with companies still reliant on banks for funding.
The “high level forum” of experts today set out 17 recommendations to accelerate the project, calling for top political backing in advance and a granular timetable for implementation in a bid to overcome flaws in past efforts.
“Since we now face the biggest economic crisis in peacetime in 90 years, it is now vital and extremely urgent to accomplish it,” the report said.
“The reality today, is that the fragmented and underdeveloped capital markets in the EU and inadequate equity financing will weaken and slow down the EU recovery and put the EU at a disadvantage.”
The 28-member panel recommended giving extra authority for the EU’s securities and insurance regulators and for streamlining tax and insolvency rules, sensitive areas that have been stumbling blocks in the past.
The group was led by former European policymaker Thomas Wieser, and included Societe Generale chairman Lorenzo Bini Smaghi, and Vittorio Grilli, chairman of JP Morgan Chase & Co.’s corporate and investment bank in the EU.
“The European banking system, although better capitalised and more resilient, is not sufficient by itself to provide the amount of credit the EU economy will need to recover from the crisis,” the report said.
The departure of Britain, Europe’s largest capital market, from the EU leaves the bloc’s economy dependent on a jurisdiction where rules may start to diverge, it added.
“With the UK having left a question for politicians is how much of this market one wants onshore, and how much offshore,” said the panel.
The European Commission, which commissioned the report, has said it would propose measures in the autumn to implement at least some of the recommendations.