# EUR-Lex - 52015DC0063 - EN

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# 52015DC0063

**GREEN PAPER Building a Capital Markets Union /* COM/2015/063 final */**

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Foreword

The Commission's
priority – Europe's priority – is jobs and growth.  To get Europe growing
again, our challenge is to unlock investment in Europe's companies and
infrastructure.  The €315bn investment package will help to kick start that
process.  But to strengthen investment for the long term, we need to build a
true single market for capital – a Capital Markets Union for all 28 Member
States.

Compared to
other parts of the world, European businesses remain heavily reliant on banks
for funding and relatively less on capital markets. Stronger capital markets would
complement banks as a source of financing, and would:

· 
unlock
more investment for all companies, especially SMEs, and for infrastructure
projects;

· 
attract
more investment into the EU from the rest of the world; and

· 
make
the financial system more stable by opening up a wider range of funding
sources.

In essence, our
task is to find ways of linking investors and savers with growth. There is no
single measure that will deliver a Capital Markets Union. Instead there will be
a range of steps, some individually modest, but whose impact will cumulatively
be significant. We need to identify and remove the barriers which stand between
investors' money and investment opportunities, and overcome the obstacles which
prevent businesses from reaching investors. We also need to make our system for
channelling those funds – the investment chain – as efficient as possible, both
nationally and across borders.

Why is this
worth doing? A few examples illustrate the potential benefits. Compared with
the US, medium-sized companies, the engines of growth in many countries,
receive five times more funding from capital markets than they do in the EU. If
our venture capital markets were as deep, as much as €90 billion of funds would
have been available to finance companies between 2008 and 2013. If SME
securitisations could be returned – safely – even to half the levels they were
in 2007 compared with today, this could be equivalent to some €20bn of
additional funding.

It is true that
many of the issues at stake – insolvency and securities laws, tax treatments –
have been discussed for many years.  The need to make progress is, however,
more pressing than ever. While this will be a long term project, requiring
sustained effort over many years, that should not stop us making early
progress. Therefore, in the next months, we will:

· 
develop
proposals to encourage high quality securitisation and free up bank balance
sheets to lend;

· 
review
the Prospectus Directive to make it easier for firms, particularly smaller
ones, to raise funding and reach investors cross border;

· 
start
work on improving the availability of credit information on SMEs so that it is
easier for investors to invest in them;

· 
work
with the industry to put into place a pan European private placement regime to
encourage direct investment into smaller businesses; and

· 
support
the take up of new European long term investment funds to channel investment in
infrastructure and other long term projects.

This Green Paper
marks the beginning of a three month consultation. We want to hear from
parliamentarians, member states, those who work in capital markets and from all
groups concerned about jobs, growth and the interests of European citizens. 
That feed-back will help us to develop an action plan to put in place the
building blocks for a fully functioning Capital Markets Union by 2019.

The
direction we need to take is clear: to build a single market for capital from
the bottom up, identifying barriers and knocking them down one by one, creating
a sense of momentum and helping to spark a growing sense of confidence in
investing in Europe's future. The free flow of capital was one of the
fundamental principles on which the EU was built. More than fifty years on from
the Treaty of Rome, let us seize this opportunity to turn that vision into
reality.

Section 1:
Building a Capital Markets Union

The
free movement of capital was enshrined in the Treaty of Rome more than fifty
years ago. It is one of the fundamental freedoms of the European Union and
should be at the heart of the single market. Yet despite the progress that has
been made, capital markets today remain fragmented and are typically organised
on national lines. Following a period of deepening, the degree of financial
market integration across the EU has declined since the crisis, with banks and
investors retreating to home markets.

Compared
with other jurisdictions, capital market based financing in Europe is
relatively underdeveloped. Our equity, debt and other markets play a smaller
role in financing growth and European businesses remain heavily reliant on
banks, making our economies vulnerable to a tightening of bank lending. There
is also insufficient investor confidence, and European savings may not always
be being put to the most productive use. . European investment levels are well
below their historical norm and European capital markets are less competitive
at the global level.

To
support a sustainable return to growth and job creation, alongside other
reforms to the business environment, capital markets need to play a larger role
in channelling financing to the economy. In practice this means ensuring that
obstacles to the movement of capital between investors and those who need
funding are identified and broken down, whether they be within a Member State
or cross border.

Building
a Capital Markets Union is a key initiative in the work programme of the
Commission. It would ensure greater diversification in the funding of the
economy and reduce the cost of raising capital, particularly for SMEs. More
integrated capital markets, especially for equity, would enhance the
shock-absorption capacity of the European economy and allow for more investment
without increasing levels of indebtedness. A Capital Markets Union should
enhance the flow of capital - through efficient market infrastructure and
intermediaries - from investors to European investment projects, improving allocation
of risk and capital across the EU and, ultimately, making Europe more resilient
to future shocks.

The
Commission has therefore committed to put in place the building blocks of a
well-regulated and integrated Capital Markets Union, encompassing all Member
States, by 2019, with a view to maximising the benefits of capital markets and
non-bank financial institutions for the wider economy.

A
Capital Markets Union should move the EU closer towards a situation where, for
example, SMEs can raise financing as easily as large companies; costs of
investing and access to investment products converge across the EU; obtaining
finance through capital markets is increasingly straightforward; and seeking
funding in another Member State is not impeded by unnecessary legal or
supervisory barriers. While these changes will help to reduce reliance on bank
financing, as lenders to a significant proportion of the economy and
intermediaries in capital markets, banks will still play a central role in
Capital Markets Union and will continue to play a vital part in the European
economy.

Not
all of these challenges are new, but the EU's need for growth makes them
pressing to solve.  It also provides the momentum needed to make progress. The
purpose of this Green Paper is to begin the debate at EU and national levels,
involving the co-legislators, other EU institutions, national Parliaments and
all those interested, on the possible short and longer-term measures to achieve
these objectives.

A
Capital Markets Union will differ from Banking Union: deepening capital markets
requires steps that will be distinct from the key elements of Banking Union.
However, the Banking Union's focus on breaking the link between bank failures
and sovereigns in the euro area will provide a platform of stability to
underpin the development of a Capital Markets Union across all EU Member
States. Likewise, well integrated capital markets will contribute to the
resilience of the Economic and Monetary Union.

A
Capital Markets Union should be based on the following key principles:

- 
it
should maximise the benefits of capital markets for the economy, jobs and
growth;

- 
it
should create a single market for capital for all 28 Member States by removing
barriers to cross-border investment within the EU and fostering stronger
connections with global capital markets;

- 
it
should be built on firm foundations of financial stability, with a single
rulebook for financial services which is effectively and consistently enforced;

- 
it
should ensure an effective level of consumer and investor protection; and

- 
it
should help to attract investment from all over the world and increase EU
competitiveness.

1.1       Delivering
a Capital Markets Union

Building
a Capital Markets Union is a long-term project.  Work is already underway to
establish a single rulebook, with a large number of key reforms[1] in the
process of being implemented. The Commission's approach will be based on an
assessment of the outstanding priorities, both in terms of likely impact and
feasibility, underpinned by thorough economic analysis, impact assessment and
consultation.

On
the basis of the outcome of this consultation, the Commission will seek to
identify the actions that are necessary to achieve the following objectives:

- 
improving
access to financing for all businesses across Europe (in particular
SMEs) and investment projects such as infrastructure;

- 
increasing
and diversifying the sources of funding from investors
in the EU and all over the world; and

- 
making
markets work more effectively and efficiently, linking investors to
those who need funding at lower cost, both within Member States and
cross-border.

The
Commission is consulting widely on the nature of the problems, possible
measures and their prioritisation. Legislation might not always be the
appropriate policy response to these challenges, and the onus in many cases
will be on the market to deliver solutions. Non-legislative steps and the
effective enforcement of competition and single market laws might offer the
best way forward in other areas. The Commission will support market-driven
solutions when they are likely to be effective, and regulatory changes only
where they are necessary.

This
paper is structured as follows.  Section 2 describes how European
capital markets are currently structured and provides a preliminary analysis of
some of the barriers to deeper and more integrated capital markets.  Further
analysis is provided in the accompanying Staff Working Document.  Section 3
seeks views on the early policy priorities we intend to take forward, building
on the Commission Communication "An Investment Plan for
Europe"[2]
including issues such as the implementation of the European Long-term
Investment Funds (ELTIF) Regulation, high quality securitisation, credit
information on SMEs, private placement and the review of the Prospectus
Directive. Section 4 seeks views on the barriers to access to finance,
widening sources of funding and making markets work more effectively and where
work may be taken forward on the basis of the feedback received. Obstacles to
cross border capital flows include issues such as insolvency, corporate,
taxation and securities laws, where further analysis and feedback is needed to
identify the scale of the challenge in each area, and the appropriate solutions
and degree of prioritisation.

By
further opening national markets for investors, issuers and intermediaries,
promoting the free flow of capital and sharing best practices, the Capital
Markets Union should also be seen as a way to help markets develop at national
level. Given
the diverse levels of development of capital markets across the EU and the
existence of specific challenges in different Member States, policy responses
may require appropriately tailored action at national level, based,
inter alia on the country specific recommendations of the Commission in
the context of the European Semester. The Commission invites Member
States to consult on specific challenges to the development of their capital
markets and to feed their conclusions into the debate.

Section
2: Challenges in European Capital Markets today

2.1       Current
state of capital markets in Europe

Apart
from direct bank lending, capital markets are the principal mechanism through
which potential investors can meet those looking for funding, and provide a
range of diversified funding sources for the economy. Chart 1 illustrates a
simple view of the flow of funds in an economy. Whilst capital markets are
predominantly concerned with direct financing, they are also closely
interlinked with financial intermediaries who often channel funds from savers
to investors.

Chart
1. Stylised view of capital markets in the broader financial system

Capital
markets have expanded in the EU over recent decades. Total EU stock market
capitalisation, for example, amounted to €8.4 trillion (around 65% of GDP) by
end 2013, compared to €1.3 trillion in 1992 (22% of GDP). The total value of
outstanding debt securities exceeded €22.3 trillion (171% of GDP) in 2013,
compared to €4.7 trillion (74% of GDP) in 1992[3].

Nonetheless,
markets remain underdeveloped in comparison with other jurisdictions. Public
equity markets in the US are almost twice the size of those in the EU (as a
percentage of GDP) and are three and a half times bigger in Switzerland (chart
2).

Chart 2: Stock market capitalisation and debt securities (% of GDP) || || || ||

|| Private equity markets in the US are also around twice the size of those in the EU, whilst private placement markets for bonds are up to three times bigger in the US.   At the same time there is wide variation in capital market development across EU Member States. For example, domestic stock market capitalisation exceeded 121% of GDP in the UK, compared to less than 10% in Latvia, Cyprus and Lithuania.  || || ||

Source: ECMI statistical package || || || ||

Chart 3: Financing patterns corporates (in % of total liabilities) || Europe has traditionally been more reliant on bank finance, with bank lending playing a significantly larger role in the financing of the corporate sector than the issuance of debt securities in the market (Chart 3). In aggregate, this greater dependence on bank lending makes the European economy, especially SMEs, more vulnerable when bank lending tightens, as happened in the financial crisis. || || ||

Source: Eurostat, OECD. Note: Loans include bank loans and intercompany loans. || || || ||

Access
to capital markets differs greatly across firms and across EU Member States.
There has been a notable increase in the issuance of corporate bonds by
non-financial corporates in the EU, partly reflecting a favourable market
environment for bond issuers due to low interest rates. Bonds have, however,
mainly been issued by large firms as opposed to small and medium-sized enterprises
(SMEs). Bond issuance has also been concentrated in larger markets, rather than
markets where corporate funding problems have been most severe.

Although
capital markets in the EU became more integrated prior to the crisis in terms
of cross-border holdings of financial instruments, the crisis revealed that
part of this integration was driven by debt-based wholesale banking flows which
were prone to sudden reversals in the face of shocks. Equity markets in the EU
remain characterised by a home bias, meaning that potential risks and rewards
are not shared across borders. Cross-border holdings of debt securities also
remain lower than would be expected in a fully integrated market. Even the best
performing national markets in the EU lack critical size, leading to a smaller
investor base and fewer financial instruments to choose from.

2.2       Challenges
and opportunities of building a Capital Markets Union

There
are a range of different obstacles to the integration and development of EU
capital markets, originating in historical, cultural, economic and legal
factors, some of which are deep-rooted and difficult to overcome.  These
include, for example, the historical preference by business for certain means
of financing, the characteristics of pension provision, the application of
prudential regulations and administrative hurdles, aspects of corporate
governance and company law, data gaps and features of many tax systems, as well
as inefficient market structures. Even in well-integrated capital markets, some
of these differences will remain. In order to achieve the benefits of a fully
integrated single market for capital, it is necessary to overcome challenges in
particular in the following three key areas.

First,
on the demand side, improving access to finance, including to risk capital,
notably for SMEs (for example innovative and high growth start-ups), is an
important priority.  Success over time will depend on overcoming information
problems, the fragmentation of key market segments and lowering the costs of
access to capital markets.  In addition, there are specific impediments to the
financing of long-term projects, including infrastructure investment.

Second,
on the supply side, the development of capital markets in the EU will depend on
the flow of funds into capital market instruments. Boosting the flow of
institutional and retail investment into capital markets would
promote the diversification of funding sources. Growing occupational and
private pension provision in Europe could result in an increased flow of funds
into a more diverse range of investment needs through capital market
instruments and facilitate a move towards market-based financing. Enhancing the
confidence of retail investors in capital markets and financial intermediaries
could increase the flow of household savings into capital market instruments
which are now largely held in home equity and bank deposits. Increasing the
global competitiveness and attractiveness of European capital markets in this
way could also boost the flow of investment.

Third,
achieving bigger, more integrated and deeper capital markets will depend on
overcoming the barriers that are fragmenting markets and holding back the
development of specific market segments. Improving the effectiveness of
markets would enable the EU to achieve the benefits of greater market size
and depth. These include more competition, greater choice and lower costs for
investors as well as a more efficient distribution of risk and better
risk-sharing. More integrated capital markets, especially for equity, would
enhance the shock-absorption capacity of the European economy and allow more
investment without increasing levels of indebtedness. Well-functioning capital
markets will improve the allocation of capital in the economy, facilitating
entrepreneurial, risk-taking activities and investment in infrastructure and
new technologies.

Section
3: Priorities for early action

The
Commission has identified a number of areas where the need for progress is
widely recognised, that have potential to bring early benefits. This section
outlines these possibilities and seeks views from interested parties on
specific elements of each area.

3.1       Lowering
barriers to accessing capital markets

The
prospectus is a detailed document setting out company information, and
the terms and risks of an investment. It is the gateway into capital markets
for firms seeking funding and most firms seeking to issue debt or equity must
produce one. It is crucial that it does not act as an unnecessary barrier to
the capital markets. The Commission will review the current prospectus
regime through a specific public consultation launched in parallel
to this Green Paper, with a view to making it easier for companies (including
SMEs) to raise capital throughout the EU[4]
and to boost the take-up of SME Growth Markets. The review will look at when a
prospectus is required, streamlining the approval process, and simplifying the
information included in prospectuses.

3.2       Widening
the investor base for SMEs

Access
to finance by SMEs has suffered more than that by larger companies in the
crisis.  Typically, information on SMEs is limited and usually held by banks,
and some SMEs struggle to reach the broader investor base of non-bank investors
that might suit their funding needs. Improving credit information would
help build an efficient and sustainable capital market for SMEs. The
development of a common minimum set of comparable information for credit
reporting and assessment could help to attract funding to SMEs. In addition,
standardised credit quality information could help the development of financial
instruments to refinance SME loans, such as SME securitisation.

Work
on credit scoring has started and received broad support from Member States.
Credit scoring provides investors and lenders with information on the
creditworthiness of SMEs. However, in Europe around 25% of all companies and
around 75% of owner-managed companies do not have a credit score. Possible
action in this area could help diversify the financing of innovative
and high growth start-ups. As a first step, the Commission plans
to hold workshops on SME credit information in 2015 to take forward this work.

3.3       Building
sustainable securitisation

Securitisation,
the process by which assets such as mortgages are pooled together for investors
to invest in, can provide a powerful mechanism for transferring risk and
increase capacity for banks to lend.  However, since the crisis, activity has
remained impaired, despite low loss rates in European securitisations.
Securitisation issuance in Europe in 2014 amounted to some €216 billion,
compared to €594 billion in 2007.[5] 
A sustainable EU high quality securitisation market relying on simple,
transparent and standardised securitisation instruments could bridge
banks and capital markets.

With
the Solvency II and Liquidity Coverage Ratio delegated acts published recently,
work has already started to ensure a comprehensive and consistent prudential
approach for simple, transparent and standardised securitisation. In addition
to these initiatives, central banks, regulators, national authorities and
private sector representatives have advocated a more comprehensive approach to
rebuilding securitisation in the EU.

For
investors, an EU-wide initiative would need to ensure high standards, legal
certainty and comparability across securitisation instruments. This framework
should increase the transparency, consistency and availability of key
information, particularly in the area of SME loans, and promote the growth of
secondary markets to facilitate both issuance and investments. The
Commission will consult on specific measures to meet these
objectives in parallel with this Green Paper.

3.4        Boosting
Long Term Investment

Investment
levels in the EU have fallen significantly from their 2007 peak and remain
below their historical norm. The European Commission has already
announced an Investment Plan that will unlock public and private investments in
the economy of at least €315 billion over the next three years with the
establishment of the new European Fund for Strategic Investments (EFSI)[6] and
published a Communication on long term financing of the European economy
setting out a range of measures to boost investment. The recently finalised European
Long-Term Investment Funds (ELTIFs) regulatory framework will allow
investors to put money into companies and infrastructure projects for the long
term. ELTIFs should have particular appeal to investors such as insurance
companies or pension funds which need steady income streams or long term
capital growth.

Views
are welcome on what further role the Commission and Member States could play in
supporting the take up of ELTIFs, including the possible extension
to ELTIFs of advantages currently available for national regimes.

3.5       Developing
European private placement markets

One way for firms to raise funds is via private placements, where
a company makes an offering of securities to an individual or small group of
investors not on public markets. These can provide a more cost effective way
for firms to raise funds, and broaden the availability of finance for
medium to large companies and potentially infrastructure projects.

Medium-sized
European companies have been accessing the US private placement market for many
years, raising $15.3 billion in 2013.[7]
Since the onset of the financial crisis, the popularity of private
placements has accelerated in Europe and some Member States have developed
private placement markets. In particular, the German and French domestic
private placement markets provided some €15 billion of debt in 2013. Barriers
to the development of pan-European markets include differences in national
insolvency laws, lack of standardised processes, documentation and information
on the credit worthiness of issuers.

As a
first step towards developing European private placement markets, a consortium
of industry bodies have established a market guide on common market practices,
principles and standardised documentation for private placements, compatible
with a diversity of legal frameworks. The guide was recently published andthe
first issuances should follow soon. The Commission welcomes this market-led
approach, which could help to facilitate the creation of a European private
placement market in the short term.

Questions

1)
Beyond the five priority areas identified for short term action, what other
areas should be prioritised?

2)
What further steps around the availability and standardisation of SME credit
information could support a deeper market in SME and start-up finance and a
wider investor base?

3)
What support can be given to ELTIFs to encourage their take up?

4)
Is any action by the EU needed to support the development of private
placement markets other than supporting market-led efforts to agree common
standards?

Section
4: Measures to develop and integrate capital markets

In
order to achieve the benefits of a fully integrated single market for capital,
it is necessary to overcome challenges in particular in the following three key
areas:

- 
improving
access to financing for all businesses across Europe (in particular
SMEs) and investment projects such as infrastructure;

- 
increasing
and diversifying the sources of funding from investors
in the EU and all over the world; and

- 
making
markets work more effectively, linking investors to those who need
funding more efficient and less costly, both within Member States and
cross-border.

4.1
Improving access to finance

Ultimately, given their size and importance, well-functioning
equity and bond markets will be crucial to ensuring an effective Capital
Markets Union and the widest access to finance. There are, however, important
frictions in the flow of finance, especially for smaller or more medium sized
companies, and for longer term projects such as infrastructure, both of which
are critical for increasing productive capacity and economic growth. These
funding problems are particularly pronounced in Member States that have been
most affected by the crisis.

SMEs have
historically been primarily dependent on bank finance. In the crisis, bank lending
decisions inevitably became more selective, on the grounds of both banks' own
balance sheet constraints and the rising default probabilities of borrowers. While
capital markets can complement the role of bank lending for SMEs, their
diversity and scant credit information is often better suited to relationship
based lending.

Alternative funding sources can, however, play an important role,
in particular for start-ups and small but rapidly growing firms in
innovative industries. These firms typically display initially low levels
of cash flows and are dependent on external finance to grow their business.
Bank finance, as well as other financing tools such as leasing and factoring,
are often difficult to access or insufficient for companies with significant
intangible assets that cannot easily be used as collateral to obtain bank
loans.

Access
to public capital markets is costly not only for SMEs, but also for mid-sized
firms that may well be more likely than SMEs to tap public markets to raise
funds. Equity issues and debt underwriting are characterised by the substantial
fixed costs of due diligence and regulatory requirements. This includes the
costs of disclosing information required by investors or regulators, meeting
other corporate governance requirements and commissioning external ratings. In
addition, companies at an early stage of development may have a commercial
interest in not disclosing detailed information about their business plan. They
may be reluctant to give up control or face greater external scrutiny. These
features often preclude small and mid-sized companies from obtaining access to
public equity and debt markets, leading them mainly to private debt and equity
markets that are generally less standardised, more complex, and often more costly.

Large
corporates
generally have sufficient size to warrant the fixed costs of tapping capital
markets and are big enough so that each individual issuance is sufficiently
large to attract the attention of underwriters, investors and analysts.
However, while issuance of corporate bonds has increased significantly over
recent years, partly compensating for the decline in bank lending, issuance of
quoted shares has remained subdued in Europe. More effective and efficient
markets can help to reduce the costs of accessing those markets and would be of
benefit to all corporates.

Finally,
the
EU requires a significant amount of new infrastructure investment to
maintain its competitiveness. The flow of funds to such projects is, however,
restricted by short-termism, regulatory barriers and other factors. Also, many
infrastructure projects display characteristics of public goods, implying that
private financing alone may not be appropriate to deliver the optimal level of
investment. While
the EFSI will make an important contribution to boosting investment in
infrastructure projects[8],
the Commission welcomes views on other means of achieving this goal.

Addressing
information problems

In Europe, most
SMEs only approach banks when seeking finance. Although almost 13% of these
applications are rejected, it is often because they do not meet the banks'
desired risk profiles, even if they are viable.  Although banks sometimes refer
SMEs on to alternative finance providers, this does not always work: sometimes,
neither banks nor SMEs are sufficiently aware of the existence of alternatives.
Banks
could be encouraged to provide better feedback to SMEs whose credit
applications are declined and to raise awareness about alternative financing
opportunities for SMEs whose credit was declined.

International
Financial Reporting Standards (IFRS) have played a key role for promoting a
single accounting language in the EU, making it easier for large listed EU
companies to have access to global capital markets.  Imposing full IFRS on smaller
companies, in particular those wanting to access dedicated trading venues,
would, however, be a source of additional cost. The
development of a simplified, common, and high quality accounting standard
tailored to the companies listed on certain trading venues[9] could
be a step forward in terms of transparency and comparability, and if applied
proportionally, could help those companies seeking cross-border investors to be
more attractive to them. The standard could become a feature of
SME Growth Markets, and be available for wider use.

The transparency
of infrastructure projects or pipelines could increase their attractiveness
for private investment as well as help regulators adopt a more tailored
prudential regime for infrastructure investments. The Investment Task Force
Report of December 2014 suggested the creation of a central EU-level website
to provide links to Member State projects/pipelines and include EU project
information (e.g. under the Connecting Europe Facility and European Structural
and Investment Funds).  Building upon the Investment Task Force Report, the
Commission has proposed the creation of a European Investment Project Pipeline
in order to facilitate access to information for investors on investment
opportunities across the EU and maximise investor participation in financing[10]. This
will include the creation of a dedicated website and common standards for the
presentation of the information. The creation of such a pipeline of projects
will build upon the work that has already begun in some Member States.

Standardisation
as a mechanism to kick start markets

Although
standardisation is not without drawbacks, some markets can be kick-started with
a common set of market rules, transparency on product features and consistent
supervision and enforcement. A certain degree
of standardisation may attract more investors and increase market depth and
liquidity. This is particularly the case in smaller Member States where markets
cannot reach minimum efficient size if restricted to domestic pools of capital.
Where common standards are not necessary or difficult to achieve, policy
efforts may instead be directed to establishing best practices across the EU to
promote the development of certain financial instruments.

The
development of a more integrated European covered bond market could
contribute to cost-effective funding of banks and provide investors with a
wider range of investment opportunities. The success of covered bonds as
funding instruments is closely linked with the development of specific national
legal frameworks. The Commission will consult in 2015 on the merits and
potential shape of an EU covered bond framework and present policy options to
achieve greater integration in covered bond markets, based on experience gained
from well functioning national frameworks. The Commission will also reflect on
whether investors should be provided with more information about the collateral
underlying covered bonds and other structured debt, similar to loan data
disclosure requirements on structured finance instruments.

Despite
the recent growth in corporate bond issuance, it is characterised by low
levels of standardisation and price transparency. Although in recent years new
electronic bond trading platforms aimed at retail investors have emerged in
some Member States, a lack of standardisation may inhibit the development of
bond trading venues and of a liquid secondary market. Greater standardisation
of corporate debt issuances could allow for a more liquid secondary market for
corporate bonds to develop. The Commission would welcome views on whether the
possibility of developing a more standardised corporate debt market should be
explored further, and whether this can best be achieved by a market led
initiative or regulatory intervention.

Another
emerging investment category with potential to provide further access to
finance is environmental, social and corporate governance investments,
such as green bonds. The proceeds of green bonds are directed towards projects
and activities that promote climate or other environmental sustainability
related purposes. The rapid growth in this market is being assisted by a
market-driven standardisation process that takes into account criteria for
green bond selection developed by, among others, the World Bank, the European
Investment Bank and the European Bank for Reconstruction and Development.
Market participants are currently developing voluntary guidelines, known as
'Green Bond Principles', that recommend transparency and promote integrity in
the development of the green bond market by clarifying the approach for issuing
green bonds.

Enabling
alternative means of financing to develop

Although
the online nature of mechanisms such as peer to peer lending and crowdfunding
would suggest great potential to contribute to the financing of the economy
across national borders, there is limited evidence of cross-border or
pan-European activity. As a follow-up to the Communication on Crowdfunding[11], the
Commission is gathering information on industry approaches to information
disclosure and Member State approaches to regulation. The preliminary results
suggest that the diverse national approaches in these areas may encourage
crowdfunding activity locally, but may not be necessarily compatible with each
other in a cross-border context.

Questions

5)
What further measures could help to increase access to funding and channelling
of funds to those who need them?

6)
Should measures be taken to promote greater liquidity in corporate bond
markets, such as standardisation? If so, which measures are needed and can
these be achieved by the market, or is regulatory action required?

7)
Is any action by the EU needed to facilitate the development of standardised,
transparent and accountable ESG (Environment, Social and Governance) investment,
including green bonds, other than supporting the development of guidelines by
the market?

8)
Is there value in developing a common EU level accounting standard for small
and medium-sized companies listed on MTFs? Should such a standard become a feature
of SME Growth Markets? If so, under which conditions?

9) Are there barriers to the development
of appropriately regulated crowdfunding or peer to peer platforms including on
a cross border basis? If so, how should they be addressed?

4.2
Developing and diversifying the supply of funding

The
size of capital markets ultimately depends on the flow of savings into capital
market instruments. Thus, for capital markets to thrive, they need to attract
institutional, retail and international investors.

Boosting
institutional investment

The role of long-term institutional investors in capital markets
has been growing significantly. Regulatory barriers and other factors can,
however, restrict the flow of long-term institutional investment to long-term
projects, including investment in infrastructure.

With
assets under management of more than €17 trillion, the European asset
management industry plays a pivotal role in channelling investors' money
into the economy. A great deal of this success is the direct result of Europe's
investment funds frameworks. The UCITS (Undertakings for Collective Investment
in Transferable Securities)[12]
framework for mutual funds is a recognised international standard, while the
Alternative Investment Fund Managers Directive (AIFMD)[13] has
created a framework within which European alternative investment managers are
able to operate.

The
regulatory cost of setting up funds, becoming authorised managers and selling
them across borders, currently varies between Member States. Reducing costs for
setting up funds, and cross border marketing more generally, would lower
barriers to entry and create more competition. Alongside new entrants, it is
also important that funds can grow and benefit from economies of scale. The Commission would welcome views on what further policy measures
could incentivise institutional investors to raise and invest larger amounts
and in a broader range of assets, such as long-term projects, start-ups, and
SMEs.

The pensions
and insurance sectors also hold significant assets of around €12 trillion
which can help to fund investment. The
new prudential regime that will apply to insurers from 1 January 2016,
Solvency II[14],
will allow companies to invest more in long-term assets by removing national
restrictions on the composition of their asset portfolio.[15]
Furthermore, the Commission has ensured that the standard formula to calculate
insurers' capital requirements does not impose obstacles to long-term
investment and matching long-dated liabilities with long-dated assets[16].
While this effort was welcomed, some have called for a tailored treatment of
infrastructure investments, in relation to the calibration of the capital
requirements of insurers and banks. Further work is needed to identify lower-risk
infrastructure debt and/or equity investments, with a view to a possible review
of prudential rules and the creation of infrastructure sub-classes.

Capital-based
schemes for pension provision are playing an increasing role in some
Member States. Such schemes, prudently managed and in a way that reflects their
societal function, can contribute to the sustainability and adequacy of pension
systemsand are increasingly important investors in the European economy. New
rules on occupational pensions which are currently under discussion could
remove barriers to pension schemes investing more in long-term assets.
Moreover, the exchange of best practices could also increase the compatibility
of national systems.

On
personal pensions, providers are subject to a number of different pieces of EU
legislation. This raises the question of whether the introduction of a
standardised product, for example through a pan-European or '29th'
regime, removing obstacles to cross-border access could potentially strengthen
the single market in personal pension provision. Any changes would need to
ensure an effective degree of consumer protection, whilst at the same time
improving coverage and take up and appropriate security of savings.

As an
alternative form of funding to traditional bank loans or issuing debt or
equity, private equity and venture capital play an important role in the
European economy. But risk-capital markets can often lack scale; this is the
case not only for the stock exchanges specialised in financing high-growth
companies, but also for risk-capital investment at the start-up or development
stage of new enterprises or in high-technology companies. There is also a wide
variation in the development of risk capital markets among Member States:
around 90% of all venture capital fund managers are concentrated in eight
Member States.[17]

In
some Member States, venture capital funds face problems reaching the scale they
need to spread their portfolio risk. The absence of an equity investment
culture, lack of information, a fragmented market and high costs seem to be
among the main reasons for this.

In an
effort to promote the provision of risk capital in the form of equity
participation or loans under certain conditions to start-ups and social
business, the EU put in place in 2013 the EuVECA (European Venture Capital
Funds)[18]
and EuSEF (European Social Entrepreneurship Funds)[19]
Regulations. Take up to date has been encouraging, but there is scope for
further growth. There are likely to be a range of barriers prevent more
widespread take up.  A particular concern that has been raised is that managers
whose portfolio exceeds €500 million cannot apply to set up and operate such a
fund, nor can they use these designations to market the funds in the EU. 
Widening the range of market participants could potentially increase the number
of EuVECA and EuSEFs available.

Public
funding can also play a role, with regional authorities being significant
funders of venture capital in several Member States. EU financial instruments
such as the Competitiveness and Innovation Framework Programme (CIP), European
Structural and Investment Funds (ESIF)[20]
and equity based financing supported by Structural Fund programmes have been
successful in mobilising venture capital for SMEs. The EU programme for
competitiveness of SMEs (COSME)[21]
and Horizon 2020 programmes will build on this. Moreover, in July 2014, state
aid rules were modified in order to allow for more State intervention, where
appropriate, in the development of the risk finance market and to improve
access for SMEs and small or innovative mid-caps.[22] The
challenge is how to increase the scale of venture capital funds, and how public
and private funding together could contribute to this.

The
lack of exit opportunities for investors may also be an obstacle to the
development of venture capital funding. The Commission is interested to know
whether measures can be taken to create a better environment for
business angels[23],
venture capital and initial public offerings to ensure better exit strategies
for investors and boost the supply of venture capital to start-ups.

Banks
are likely to remain key actors and participants in capital markets, as
issuers, investors and intermediaries, and will continue to play a major role
in credit intermediation through their role in funding and information
provision. At the same time, new technologies and business models are emerging,
such as peer-to-peer lending or other types of non-bank direct lending, which
seek to offer funding to SMEs and start-ups. The Commission welcomes views on
whether there are significant barriers to entry to providing and growing these
services alongside bank lending.

Questions

10) What policy measures
could incentivise institutional investors to raise and invest larger amounts
and in a broader range of assets, in particular long-term projects, SMEs and
innovative and high growth start-ups?

11) What steps could be taken to reduce
the costs to fund managers of setting up and marketing funds across the EU?
What barriers are there to funds benefiting from economies of scale?

12) Should work on the tailored
treatment of infrastructure investments target certain clearly identifiable
sub-classes of assets? If so, which of these should the Commission prioritise
in future reviews of the prudential rules such as CRDIV/CRR and Solvency II?

13) Would the
introduction of a standardised product, or removing the existing obstacles to
cross-border access, strengthen the single market in pension provision?

14) Would changes to the EuVECA and
EuSEF Regulations make it easier for larger EU fund managers to run these types
of funds? What other changes if any should be made to increase the number of
these types of fund?

15) How can the EU further develop
private equity and venture capital as an alternative source of finance for the
economy? In particular, what measures could boost the scale of venture capital
funds and enhance the exit opportunities for venture capital investors?

16)
Are there impediments to increasing both bank and non-bank direct lending safely
to companies that need finance?

Boosting
retail investment

Retail
investors' appetite for investing directly into capital markets is generally
small across the EU, being predominantly channelled through collective
institutional investments. However, European households have significant
savings held in bank accounts that in some cases could be used more
productively. Declining deposit rates may provide some incentives for
households to shift more of their financial wealth from banks into market
securities.

Mutual
funds products such as UCITS are popular vehicles for retail investors to
invest in capital markets. Despite this, the rate of direct retail
participation in UCITS remains relatively low: private households only
accounted for 26% of investment fund ownership in the euro area in 2013[24]. To
ensure a wider choice among investment fund products and increased competition,
the Commission would be interested in views on ways in which cross-border
retail participation in UCITS could be increased.

Retail
investors will only be attracted to invest in capital markets if they trust
them as well as the financial intermediaries operating in them, and believe
they can safely secure a better return on their savings. Restoring the trust of
investors is a key responsibility and challenge for the financial sector.
Strengthening financial literacy would also enable consumers to choose
financial products more effectively and easily, and compare products. There are
a number of national programmes in place to improve financial literacy and
education, as well as the EU project "Consumer Classroom." In some
cases more standardised or simple financial products, which are available in
some Member States, might also be useful.

Regulation
and supervision can contribute to building investor confidence. The European
Securities and Markets Authority (ESMA) and the European Insurance and
Occupational Pensions Authority (EIOPA) have been given increased powers on
investor protection through MIFID II[25]
and other regulations. As mentioned in the recent Commission review of the
European Supervisory Authorities (ESAs)[26],
their mandates in the area of consumer/investor protection could be clarified
and enhanced where necessary.

Enhancing
cross-border competition in retail financial services
could bring greater choice, lower prices and better services. Financial
services provided by electronic and mobile tools have potential to contribute
in this regard, provided that concerns over guarding against fraud, hacking and
money laundering can be addressed while maintaining ease of use for customers.
The Commission will begin preparatory work on how the single market for retail
financial services can deliver more benefits to consumers.

Questions

17)
How can cross border retail participation in UCITS be increased?

18)
How can the ESAs further contribute to ensuring consumer and investor
protection?

19) What policy measures could increase
retail investment? What else could be done to empower and protect EU citizens
accessing capital markets?

20) Are there national best practices in
the development of simple and transparent investment products for consumers
which can be shared?

Attracting
international investment

European
capital markets must be open and globally competitive, well regulated and
integrated to attract foreign investment, which means maintaining high EU
standards to ensure market integrity, financial stability and investor
protection. Given the global nature of capital markets, it is important that
the Capital Markets Union is developed taking into account the wider global
context.

While
the post-crisis downscaling of gross capital flows affected all regions, the EU
(and the euro area in particular) has undergone the most sizeable decline in
the magnitude of gross capital inflows and outflows as a percentage of GDP. All
components of gross capital inflows (portfolio investment, foreign direct
investment, and bank intermediated claims) were lower in 2013 than in 2007.

According
to International Monetary Fund (IMF) data, at the end of 2013 the global total
stock of cross-border portfolio investments was €25 trillion. The total stock
of cross-border portfolio investments between EU Member States was €9.6
trillion, whereas portfolio investments coming from outside the EU amounted to
€5 trillion. Therefore, there is still a wide scope for attracting additional
equity and debt investment from third countries.

The
EU's international trade and investment policy[27]
has an important role to play in supporting international investment.
International trade and investment agreements liberalise the movement of
capital, regulate market access and investment, including for the supply of
financial services, and can help to achieve both an appropriate level of
protection for investors in Europe and a level playing field across the EU[28]. In
addition, the Commission is contributing to international work on free movement
of capital, including, for example, on the OECD Codes of Liberalisation of
Capital Movements.

Direct
marketing of EU investment funds and other investment instruments in third
countries should be facilitated. This could be achieved by reducing barriers
for EU financial institutions and services to access third country markets,
including, where appropriate, by opening markets for cross border asset management
in future trade agreements.

In
light of these trends, the Commission is interested in views on measures
that could be taken to increase the attractiveness of EU markets to
international investors.

Questions 21) Are there additional actions in the field of financial services regulation that could be taken ensure that the EU is internationally competitive and an attractive place in which to invest? 22) What measures can be taken to facilitate the access of EU firms to investors and capital markets in third countries?

4.3
Improving market effectiveness – intermediaries, infrastructures and the
broader legal framework

Single
rulebook, enforcement and competition

The
development of a single rulebook in recent years has been a major step towards
a more harmonised regulatory framework for capital markets in which firms can
compete cross border on a level playing field. The success of the single
rulebook also depends on the effective implementation and consistent
enforcement of the rules. There are still some key pieces of EU legislation
which allow for the addition of requirements, so-called 'gold-plating' by
Member States, and issues of divergent interpretations of rules have also
arisen. The Commission, in cooperation with Member States and the ESAs, is
working to ensure that EU financial legislation is correctly implemented and
enforced on the ground.

Competition plays a key role in ensuring
that consumers get the best products and services at adequate prices, and that
investment flows are channelled towards the most productive uses. Entry
barriers for competitors should be removed where possible and access to
financial market infrastructure needs to be assured. To support more efficient
and well-functioning capital markets, the Commission has pursued several cases
in recent years using its competition powers. The Commission
will continue to ensure that competition law is rigorously applied to avoid
restrictions or distortions of competition affecting the emergence of
integrated and well-functioning capital markets.

The
principle of free movement of capital should also be enforced to tackle
unjustified barriers to investment flows within the EU. For instance,
requirements imposed by host Member States on market operators with a European
marketing passport granted by their home Member State could in some cases
constitute an unjustified barrier to the free movement of capital. A more
stable, transparent and predictable framework for investors could contribute to
building confidence and enhancing the attractiveness of the Single Market as a
place to invest for the long term.

Supervisory
convergence

Although
regulatory frameworks for capital markets have largely been harmonised, the
success of reforms also depends on the implementation and consistent enforcement
of the rules. The ESAs play a key role in promoting convergence. The Commission
recently published a report on the operation of the ESAs and the European
System of Financial Supervision (ESFS)[29]
that identified a number of areas where possible improvements could be made in
the short and medium term.  The Commission
will continue to review the functioning and operation of the ESAs, as well as
their governance and financing.

The
ESAs have an important role to play in continuing to foster greater supervisory
convergence, increasing the focus on and use of peer review and appropriate
follow-up. Furthermore, use of dispute settlement where it is needed and
investigatory powers in relation to alleged breaches of EU law could facilitate
consistent implementation and application of EU law across the single market.

Further
consideration could be given to the role played by the ESAs in this context. 
To the extent that national supervisory regimes may result in differing
investor protection levels, barriers to cross-border operations and
discouraging companies seeking financing in other Member States, there may be a
further role for the ESAs to play in increasing convergence.

Data
and reporting

The
development of common data and reporting across the EU could help to support
closer capital market integration.  For example, in the equity
markets a "consolidated tape" is essential to ensure the quality,
availability and timeliness of post-trade information. Should
market-led efforts prove to be insufficient to deliver a consolidated tape
which is easily accessible and usable for market participants on a reasonable
commercial basis, consideration may need to be given to other solutions,
including entrusting the operation of a consolidated tape to a commercial
entity. The Commission will also seek to ensure that the dissemination of
consolidated information at commercially reasonable terms takes place
unhindered.

More
efficient approaches towards supervisory and market reporting involving
national authorities or ESMA, for example in relation to common IT approaches
for certain reporting requirements, could also be helpful for market
participants. Views would be welcome as to whether and what further work is
needed to improve data and reporting in the EU.

Market
infrastructure and securities law

Market
infrastructure and securities law – the 'piping' which channels investments and
the laws under which it is treated – are key determinants of the efficiency and
ease by which investment can be made. The regulatory framework applying to
market infrastructures is in the process of being put into place, with
legislation to ensure the robustness of central counterparties (CCPs) and
central securities depositories (CSDs) and the Target2Securities (T2S) project
run by the Eurosystem. As announced in the Commission Work Programme, the
Commission intends to bring forward a legislative proposal to create a European
framework for the recovery and resolution of systemically relevant financial
institutions such as Central Counterparties. There are, however, some aspects
relating to market infrastructures supporting trading where there may be
potential to make further improvements.

Collateral is a vital part of the
financial system as it underpins a large number of transactions in the market
and provides
a safety net in case there are problems. The fluidity of collateral throughout
the EU is currently restricted, preventing markets from operating efficiently.
Since the financial crisis, the demand for collateral has increased, driven by
market demand for more secured funding as well as new regulatory requirements,
such as set out in the European Market Infrastructure Regulation (EMIR)[30] and
Capital Requirements Regulation (CRR).[31]
With demand for collateral rising, there are risks that the same securities are
being reused to support multiple transactions as was the case pre-crisis and
work is underway internationally to look at these issues. Views are welcome as
to whether work should be undertaken to facilitate an appropriately regulated
flow of collateral throughout the EU.

Also,
while there has been considerable progress in harmonising rules needed for the
transparency and integrity of securities markets, legislation relating to
investors' rights in securities differs across Member States. As a result,
investors have difficulties assessing the risk of capital investments in
different Member States. Discussions on
this issue date back more than a decade starting with the Second Giovaninni
Report in 2003. This issue is, however, complex as it touches on
property, contract, corporate and insolvency law, as well as the laws on
holding of securities and conflict-of-laws. Opposing views hold that
harmonisation at EU level and a single EU definition of securities would not be
necessary. Furthermore, it is argued that the launch of Target 2 Securities in
mid-2015 will remove the legal and operational risks associated with the
transfer and holding of securities across jurisdictions, reduce costs and could
increase cross-border investment. In light of these constraints, views would be
welcome as to whether any targeted changes to legislation on securities
ownership rules that could materially contribute to more integrated capital
markets within the EU are feasible and desirable.

Another
important aspect in developing a pan-European market in securitisation and
financial collateral arrangements, and also of other activities such as
factoring, is achieving greater legal certainty in cases of cross-border
transfer of claims and the order of priority of such transfers, particularly in
cases such as insolvency. A report identifying the problems and possible
solutions will be published by the Commission in 2015.

Banks
play a key part not only in lending but also in capital market intermediation,
notably by providing liquidity through market making. Some research indicates
signs of liquidity decreasing in some market segments, but also that liquidity
may have been under-priced in the run-up to the crisis. The decline in
liquidity is attributed by some to a necessary market correction as well as a
decline in market confidence in the aftermath of the crisis, and by others to
global post-crisis regulatory measures. The Commission is
interested in views on how to achieve better priced and robust liquidity
conditions, notably whether measures could be taken to support liquidity in
vulnerable segments and whether there are barriers to entry for new market
participants who can play a role in matching buyers to sellers.

Company
law, corporate governance, insolvency, and taxation

EU
legislation exists in the area of corporate governance (e.g. on
corporate governance statements[32],
on the cross-border exercise of shareholder rights[33]), but
corporate governance often remains the preserve of domestic law and standards.
After the financial crisis a review of the EU corporate governance framework
was undertaken through two consultations.[34]
The
revision of the shareholder rights directive which is underway aims to
encourage institutional investors and asset managers to provide more long term
capital to companies.

The
protection of minority shareholder rights improves corporate governance and
the attractiveness of companies for foreign investors, since these
may often be minority investors. Another aspect of sound corporate governance
is the efficiency of company boards in terms of controlling company managers.
As company boards protect the interests of investors, efficient and
well-functioning company boards are also key to attracting investment.

Despite
several directives on company law[35],
businesses still face important obstacles to their  cross-border mobility
and restructurings. Further reforms to company law may be helpful in
overcoming barriers to cross-border establishment and operation of companies.

Divergent
national conflict-of-law rules regarding the internal functioning of a
company can cause legal uncertainty, as they may lead to a situation where a
company is subject to the laws of various Member States at the same time, for
instance, in cases where a company is incorporated in one Member State but
operates mainly from another Member State.

While
the discussion around harmonising substantive insolvency legislation has
been slow over the past 30 or so years due to its complexity, there has been
considerable progress in the area of conflict-of-laws rules for cross-border
insolvency proceedings.[36]
However, underlying
national insolvency frameworks are still divergent in their basic features and
in their effectiveness.[37]
Reducing these divergences could contribute to the emergence of pan-European
equity and debt markets, by reducing uncertainty for investors
needing to assess the risks in several Member States.  Furthermore, the lack or
inadequacy of rules enabling early debt restructuring in many Member States,
the absence of "second chance" provisions, and the excessive length
and costs of formal insolvency proceedings can lead to low recovery rates for
creditors and discourage investors. With a view to achieving progress on
insolvency, the Commission adopted a Recommendation on a new approach to
business failure and insolvency[38] in
which it urges Member States to put in place early restructuring procedures and
'second chance' provisions. The recommendation also invites Member States to
consider applying the principles to consumer over-indebtedness and bankruptcy.
An evaluation of the Recommendation is planned for 2015.

Differences
in tax regimes across Member States can impede the development of a
single market for capital. For example, they can create obstacles to
cross-border investments such as pensions and life insurance. As a follow-up to
the White Paper on Pensions[39],
the Commission conducted a study on discriminatory rules relating to pension
and life insurance capital, contributions, and pay-outs. The Commission will
take action as necessary if any discriminatory rules are found and
discriminatory tax rules on cross-border investments by life insurance
companies and by pension funds in real estate at a later stage. Work is also
continuing on simplifying withholding tax relief procedures related to
post-trading.

In
addition to the tax treatment for different market participants across Member
States, there are also differences in the tax treatment of different types of
financing, which may create distortions. For example, differences in the tax
treatment of debt and equity financing might increase the reliance of
companies on debt and bank funding.    Furthermore, differences across Member
States in the definition of debt and equity and their respective tax treatment,
including in relation to regulatory capital instruments, may hamper a
level-playing field, fragment markets and create opportunities for
profit-shifting.

Finally,
obtaining finance is especially difficult for start-ups as they lack collateral
and a proven track record that can provide certainty to suppliers of financing.
Start-up companies are, however, more likely to bring innovations that
challenge the market position of large incumbent firms. A recent study
commissioned by the European Commission[40] concluded
that targeting tax incentives for R&D expenditure at young
innovative companies is an effective practice.

Technology

An
important driver of the integration of capital markets is the rapid development
of new technologies, which have contributed for example to the development of
electronic trading platforms, high frequency trading and so-called
"FinTech" companies. "Fintech" can be defined as the
combination of innovative financial services and the availability of capital
through the use of new (digital) technologies, such as crowdfunding. According
to a recent report, since 2008 global investment in FinTech ventures has
tripled to nearly $3 billion in 2013; this trend is set to continue, with
global investment on track to grow to up to $8 billion by 2018.[41]

European
and national company law has not kept pace with technological development, for
example by insufficiently integrating the benefits of digitalisation.
Exchanges of information between companies, shareholders and public authorities
are often still paper-based. For example, in many companies, shareholders still
cannot vote electronically and there is no Europe-wide on-line registration of
companies. Use of modern technologies in these areas could help reduce costs
and burdens, but also ensure more efficient communication, particularly in a
cross-border context.

Questions:

23)
Are there mechanisms to improve the functioning and efficiency of markets not
covered in this paper, particularly in the areas of equity and bond market
functioning and liquidity?

24)
In your view, are there areas where the single rulebook remains insufficiently
developed?

25)
Do you think that the powers of the ESAs to ensure consistent supervision are
sufficient? What additional measures relating to EU level supervision would
materially contribute to developing a capital markets union?

26)
Taking into account past experience, are there targeted changes to securities
ownership rules that could contribute to more integrated capital markets within
the EU?

27)
What measures could be taken to improve the cross-border flow of collateral?
Should work be undertaken to improve the legal enforceability of collateral and
close-out netting arrangements cross-border?

28)
What are the main obstacles to integrated capital markets arising from company
law, including corporate governance? Are there targeted measures which could
contribute to overcoming them?

29)
What specific aspects of insolvency laws would need to be harmonised in order
to support the emergence of a pan-European capital market?

30)
What barriers are there around taxation that should be looked at as a matter of
priority to contribute to more integrated capital markets within the EU and a
more robust funding structure at company level and through which instruments?

31)
How can the EU best support the development by the market of new technologies
and business models, to the benefit of integrated and efficient capital
markets?

32) Are there other issues, not
identified in this Green Paper, which in your view require  action to achieve a
Capital Markets Union? If so, what are they and what form could such action
take?

Section 5:  Next steps

On
the basis of the outcome of this consultation, the Commission will consider the
priority actions needed to put in place by 2019 the building blocks for an
integrated, well-regulated, transparent and liquid Capital Markets Union for
all 28 Member States. In addition to supporting market-led initiatives where
possible, EU action could take the form of non-legislative measures,
legislation, competition enforcement action and infringements, as well as
country specific recommendations to the Member States in the context of the
European semester. Member States are encouraged to consider whether barriers
and obstacles created by national legislation and practices exist and how best
to overcome them.

Interested
parties are invited to send their answers to the questions in this Green Paper
by 13 May 2015 through the online questionnaire:

http://ec.europa.eu/finance/consultations/2015/capital-markets-union/index_en.htm
During the consultation process, the European Commission:

will
  engage with the European Parliament to get direct feedback from its
  Members; 
 invites
  Member States to organise consultations and events with the public and
  national parliamentarians to promote discussion on Capital Markets Union
  at national level; and
 will
  organise in a transparent and balanced manner workshops to consult those
  with specific technical expertise (such as academics, market participants)
  to reach an informed view on specific issues.

The Commission will
organise a conference in the summer of 2015 to draw the consultation to a
close.  An Action Plan on Capital Markets Union will be published later in
2015.

[1] Such as the legislation on markets in financial instruments
(MIFID II), market abuse (MAR/MAD), Alternative Investment Fund Managers
(AIFMD), European market infrastructure (EMIR) and central securities
depositories (CSDR)

[2] COM(2014) 903 final,
26.11.2014

[3] ECMI Statistical package 2014

[4] Part
of the REFIT (Regulatory Fitness and Performance) programme

[5] SIFMA/AFME
European Structured Finance Data Tables (4th Quarter 2014)

[6] Proposal
for a Regulation of the European Parliament and of the Council on
the European Fund for Strategic Investments and amending Regulations (EU) No
1291/2013 and (EU) No 1316/2013, COM(2015)10

[7] See ICMA Q3 2014
report

[8] In
the context of infrastructure investments, the European Structural and Investment
Funds (ESIF) can also play an important role, provided that the relevant
eligibility criteria are met

[9] Such as Multilateral
trading facilities (MTFs)

[10] See COM(2015)10
final, Article 9

[11] COM
(2014) 172

[12] Directive
2014/91/EU

[13] Directive 2011/61/EU
and amending Directives 2003/41/EC and 2009/65/EC and Regulations (EC) No
1060/2009 and (EU) No 1095/2010

[14] Directive
2009/138/EC

[15] Separately, in the
area of bank prudential regulation, the Commission Delegated Act on Liquidity
Coverage Ratio (LRC) provides increased incentives for investments in
infrastructure and SMEs that would facilitate investments into SMEs

[16]
http://europa.eu/rapid/press-release_MEMO-14-578_en.htm

[17] UK, Germany Sweden,
Denmark, Finland Netherlands, France and Spain

[18] Regulation (EU)
No 345/2013

[19]
Regulation (EU) No 346/2013

[20] Regulation (EU) No
1303/2013

[21] Regulation (EU) No 1287/2013

[22] 2014/C
19/04

[23] Business
angels are individual investors, usually with business experience, who provide
capital for start-ups

[24] Fact Book 2014, European
Fund and Asset Management Association

[25] Directive
2014/65/EU and amending Directive 2002/92/EC and Directive 2011/61/EU

[26] COM(2014) 509

[27] COM (2010) 343

[28] The EU also seeks to ensure in its trade and investment agreements
appropriate guarantees to safeguard appropriate protections in areas such as
safety, health, environmental protection or cultural diversity

[29] COM(2014) 509

[30] Regulation (EU) No
648/2012

[31] Regulation (EU) No 575/2013
and
amending Regulation (EU) No 648/2012

[32] Directive 2006/46/EC

[33] Directive 2007/36/EC

[34]
COM(2010) 284 and COM(2011) 164

[35] For example Council
Regulation 2157/2001 and Directive 2005/56/EC

[36] Regulation 1346/2000
on insolvency proceedings will be replaced by an improved legal instrument in
2015

[37]
Commission Staff Working Document (2014) 61 final

[38]
Commission Recommendation C(2014) 1500

[39]  The
White Paper "An Agenda for Adequate, Safe and Sustainable Pensions"
was adopted on 16 February 2012, building on the 2010 Green Paper consultation.
The White Paper takes stock of the challenges to adequacy and sustainability of
pension systems and puts forward a range of policy measures at the EU level

[40]  CPB (2014),
"Study on R&D tax incentives", Taxation papers No 52

[41] http://www.accenture.com/SiteCollectionDocuments/PDF/Accenture-Rise-of-Fintech-New-York.pdf