EN Official Journal of the European Union C 175/11

OPINION OF THE EUROPEAN CENTRAL BANK

of 25 April 2012

on a proposal for a regulation of the European Parliament and of the Council on European venture capital funds and on a proposal for a regulation of the European Parliament and of the Council on European social entrepreneurship funds

(CON/2012/32)

2012/C 175/05

Introduction and legal basis

On 20 January 2012, the European Central Bank (ECB) received a request from the Council of the European Union for an opinion on a proposal for a regulation of the European Parliament and of the Council on European venture capital funds (1) (hereinafter the ‘proposed European venture capital funds regulation’) and on a proposal for a regulation of the European Parliament and of the Council on European social entrepreneurship funds (2) (hereinafter the ‘proposed EuSEF regulation’) (hereinafter referred collectively as the ‘proposed regulations’).

The ECB’s competence to deliver an opinion on the proposed regulations is based on Articles 127(4) and 282(5) of the Treaty on the Functioning of the European Union, since the proposed regulations contain provisions with a bearing on the integration of European financial markets and affecting the European System of Central Banks’ contribution to the smooth conduct of policies by the competent authorities relating to the prudential supervision of credit institutions and the stability of the financial system under Article 127(5) of the Treaty. In accordance with the first sentence of Article 17.5 of the Rules of Procedure of the European Central Bank, the Governing Council has adopted this opinion.

General observations

1. The proposed European venture capital funds regulation aims at overcoming the funding shortfalls that European small and medium-sized enterprises (SMEs) encounter in their start-up phases. As a large part of the funding of these companies originates from small funds, with an average size of EUR 60 million in assets under management, the regulation aims at improving the ability to raise capital across the EU. It establishes specific European venture capital funds with common characteristics under a single regulatory framework. This would provide certainty and transparency towards all stakeholders, including investors, regulators and the companies eligible for investments. The introduction of a single market passport, by which a fund registered in one Member State could market units and shares in other Member States, would reduce the administrative burden and limit regulatory barriers.

2. This framework is complemented by the proposed EuSEF regulation, which aims to stimulate funding for social business through the establishment of a new category of European social entrepreneurship funds (hereinafter ‘EuSEFs’). This would help investors identify and compare funds investing in social business and broaden the possibilities of marketing these funds to international investors.

3. The Europe 2020 strategy (3) restated the need to engage in targeted regulatory action to improve SMEs’ access to financing, in particular by addressing barriers that hinder the flow of venture capital financing by means of dedicated investment funds. The European Council endorsed this approach calling for the removal of remaining regulatory obstacles to cross-border flows of venture capital (4). As a result, the Commission announced in April 2011 an initiative to ensure that venture capital funds established in any Member State can raise capital throughout the EU (5).

4. The ECB has already noted the difficulties recently encountered by many SMEs in accessing finance, more than for large firms, especially at times of market stress (6). In facilitating access to funding for rapidly expanding SMEs and streamlining the applicable regulatory requirements, the ECB trusts that the proposed new regimes would contribute significantly to the development of an innovative and sustainable economy. Overcoming the fragmentation of the funding for innovative and socially-focused SMEs and fostering the emergence of an integrated and fluid, EU-wide financial market which would encourage and facilitate cross-border investment in these sectors is crucial for the successful and timely delivery of the Europe 2020 strategy.

5. Therefore, the ECB welcomes the proposed regulations which will introduce uniform requirements for funds operating under a single, European designation and an identical substantive regulatory framework, while ensuring adequate supervision. In this regard, the ECB notes several features that would contribute to achieving an appropriate and balanced regulatory framework: the voluntary nature of the regime (7), the cross-border notification process between the competent authorities (8), the rules governing the behaviour of a qualifying manager and disclosure requirements (9), as well as the provisions designed to ensure the effective supervision of the use of the passport (10).

Specific observations

6. The ECB supports the Commission’s objective of ensuring the consistency of the proposed regulations with the existing regime for alternative investment funds managers under Directive 2011/61/EU of the European Parliament and of the Council of 8 June 2011 on alternative investment fund managers and amending Directives 2003/41/EC and 2009/65/EC and Regulations (EC) No 1060/2009 and (EU) No 1095/2010 (11). In this respect, the ECB welcomes the reference in the proposed regulations to the threshold in Directive 2011/61/EU (12), which introduces a limit of EUR 500 million of capital funds that would delineate the European venture capital funds and EuSEF regimes from the framework established by Directive 2011/61/EU.

7. The ECB notes that the above threshold aims to distinguish alternative investment funds managers with activities which could have ‘significant consequences for financial stability’ from those which are unlikely to do so and that the proposed regimes will apply to systemically non-important funds (13).

8. The scope of the proposed regulations is also conditioned by the requirement for all qualifying venture capital and social entrepreneurship funds to be unleveraged, to ensure that qualifying funds do not contribute to the development of systemic risks and that they concentrate on supporting qualifying portfolio companies (14). Therefore, whilst the concept of leverage is fundamental to the business model implemented by many alternative investment fund managers (15), the ECB considers it appropriate to make explicit the exclusion of any possible leverage in the case of the proposed European venture capital funds and EuSEF regimes (16).

Where the ECB recommends that the proposed regulation is amended, specific drafting proposals are set out in the Annex accompanied by explanatory text to this effect.

Done at Frankfurt am Main, 25 April 2012. The President of the ECB Mario DRAGHI

(1) COM(2011) 860 final.

(2) COM(2011) 862 final.

(3) Communication from the Commission on ‘Europe 2020 — A strategy for smart, sustainable and inclusive growth’, COM(2010) 2020 final.

(4) Conclusions of the European Council of 4 February 2011, paragraph 22.

(5) Communication from the Commission on the ‘Single Market Act — Twelve levers to boost growth and strengthen confidence — Working together to create new growth’, COM(2011) 206 final, in particular point 2.1.

(6) ECB Opinion CON/2012/21 of 22 March 2012 on: (i) a proposal for a directive on markets in financial instruments repealing Directive 2004/39/EC of the European Parliament and of the Council; (ii) a proposal for a regulation on markets in financial instruments and amending Regulation (EMIR) on OTC derivatives, central counterparties and trade repositories; (iii) a proposal for a directive on criminal sanctions for insider dealing and market manipulation: and (iv) a proposal for a regulation on insider dealing and market manipulation; (market abuse), paragraph 8. Not yet published in the Official Journal. The English version is available on the ECB’s website at: http://www.ecb.europa.eu

(7) Article 4 of the proposed European venture capital funds regulation and Article 4 of the proposed EuSEF regulation.

(8) Articles 15 and 20(3) of the proposed European venture capital funds regulation and Articles 16 and 21(3) of the proposed EuSEF regulation.

(9) Articles 7 to 12 of the proposed European venture capital funds regulation and Articles 7 to 13 of the proposed EuSEF regulation.

(10) Articles 13 to 22 of the proposed European venture capital funds regulation/Articles 14 to 23 of the proposed EuSEF regulation.

(11) OJ L 174, 1.7.2011, p. 1. Commission staff working paper — Impact assessment accompanying the proposal for a regulation of the European Parliament and of the Council on European venture capital funds, SEC(2011) 1515, p. 37.

(12) Article 3(2)(b) of Directive 2011/61/EU.

(13) Recital 17 of Directive 2011/61/EU.

(14) Recital 13 of the proposed European venture capital funds regulation and recital 13 of the proposed EuSEF regulation.

(15) Paragraph 11 of ECB Opinion CON/2009/81 of 16 October 2009 on a proposal for a directive of the European Parliament and of the Council on alternative investment fund managers and amending Directives 2004/39/EC and 2009/…/EC (OJ C 272, 13.11.2009, p. 1).

(16) Article 5(2) of the proposed European venture capital funds regulation and Article 5(2) of the proposed EuSEF regulation.