COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS Action Plan on Building a Capital Markets Union
Date: 2015-09-30
Institutions: Directorate-General for Financial Stability, Financial Services and Capital Markets Union, European Commission
Subjects: EU financial instrument, EU investment, action programme, aid to undertakings, capital goods, capital market, economic growth, economic integration, investment aid, small and medium-sized enterprises

EN 

   EN 

   EUROPEAN COMMISSION  Brussels, 30.9.2015  COM(2015) 468 final   COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS Action Plan on Building a Capital Markets Union {SWD(2015) 183 final} {SWD(2015) 184 final}  
 
 
Contents 

INTRODUCTION ............................................................................................................... 3 

1.  THE PATH TO GROWTH – FINANCING FOR INNOVATION, START-UPS 

AND NON-LISTED COMPANIES ........................................................................... 7 

1.1.  Financing the start-up phase .............................................................................. 7 
1.2.  The early expansion phase ................................................................................ 8 
1.3.  Supporting SMEs seeking finance .................................................................... 9 
1.4.  Loan-originating funds .................................................................................... 10 
1.5.  Private placements ........................................................................................... 11 

2.  MAKING IT EASIER FOR COMPANIES TO ENTER AND RAISE CAPITAL 

ON PUBLIC MARKETS .......................................................................................... 12 

3. 

INVESTING  FOR  THE  LONG  TERM, 
SUSTAINABLE INVESTMENT ............................................................................. 15 

INFRASTRUCTURE  AND 

Improving the investment environment through the regulatory framework ... 15 
3.1. 
3.2.  Supporting long term and infrastructure financing ......................................... 16 
3.3.  Harnessing finance to deliver environmental sustainability ........................... 17 
3.4.  Call for evidence on existing regulatory framework ....................................... 17 

4.  FOSTERING RETAIL AND INSTITUTIONAL INVESTMENT .......................... 18 

4.1.  Retail investors ................................................................................................ 18 
Institutional investors ...................................................................................... 20 
4.2. 

5.  LEVERAGING  BANKING  CAPACITY  TO  SUPPORT  THE  WIDER 

ECONOMY ............................................................................................................... 21 

6.  FACILITATING CROSS-BORDER INVESTING ................................................. 23 

6.1.  Legal certainty and market infrastructure for cross-border investing ............. 23 
6.2.  Removing national barriers to cross-border investment.................................. 24 
6.3.  Promoting financial stability and supervisory convergence ........................... 26 
6.4.  Facilitating international investment ............................................................... 27 

7.  NEXT STEPS AND MONITORING ....................................................................... 28 

2 

 
 
 
 
 
 
 
INTRODUCTION 

The Commission's top priority is to strengthen Europe's economy and stimulate investment to 
create jobs. The EUR 315 billion investment plan, up and running less than a  year after the 
Commission took office, will help to kick start that process. To strengthen investment for the 
long term, we need stronger capital markets.  These would provide new sources of funding for 
business, help increase options for savers and make the economy more resilient. That is why 
President Juncker set out as one of his key priorities, the need to build a true single market for 
capital – a Capital Markets Union for all 28 Member States. 

The  free  flow  of  capital  was  one  of  the  fundamental  principles  on  which  the  EU  was  built. 
Despite the progress that has been made over the past 50 years, Europe's capital markets are 
still  relatively  underdeveloped  and  fragmented.  The  European  economy  is  as  big  as  the 
American one, but  Europe’s equity markets  are less  than half the size, its debt  markets less 
than a third. The gap between Member States is even bigger than that between Europe and the 
US. More integrated capital markets will lead to efficiency gains and support Europe’s ability 
to fund growth.  

Capital Markets Union will reinforce the third pillar of the Investment Plan for Europe. It will 
offer benefits for all 28 Member States, while also buttressing Economic and Monetary Union 
by supporting economic convergence and helping to absorb economic shocks in the euro area, 
as set out in the report of the Five Presidents on Completing Economic and Monetary Union. 

Stronger  capital  markets  will  complement  Europe’s  strong  tradition  of  bank  financing,  and 
will: 

  Unlock more investment from the EU and the rest of the world: Capital Markets Union 
will help  to mobilise  capital  in  Europe and channel it to all companies,  including  SMEs, 
infrastructure and long term sustainable projects that need it to expand and create jobs. It 
will provide households with better options to meet their retirement goals. 

  Better  connect  financing  to  investment  projects  across  the  EU:  Member  States  with 
small  markets  and  high  growth  potential  have  a  lot  to  gain  from  a  better  channelling  of 
capital  and  investment  into  their  projects.  Member  States  with  more  developed  capital 
markets will benefit from greater cross-border investment and saving opportunities. 

  Make the financial system more stable: integrated financial and capital markets can help 
Member  States,  especially  those  inside  the  euro  area,  share  the  impact  of  shocks.  By 
opening up a wider range of funding sources, it will help to share financial risks and mean 
that EU citizens and companies are less vulnerable to banking contractions. Furthermore, 
more  developed  equity  markets,  as  opposed  to  increased  indebtedness,  allow  for  more 
investment over the long term. 

  Deepen financial integration and increase competition: more cross-border risk-sharing, 
deeper  and  more  liquid  markets  and  diversified  sources  of  funding  will  deepen  financial 
integration, lower costs and increase European competitiveness. 

Put  simply,  Capital  Markets  Union  will  strengthen  the  link  between  savings  and  growth.  It 
will provide more options and better returns for savers and investors. It will offer businesses 
more choices of funding at different stages of their development.  

3 

 
 
 
Why is it worth doing? 

A  few  examples  illustrate  the  potential  benefits.  Compared  with  the  US,  European  SMEs, 
receive  five  times  less  funding  from  capital  markets. If  our  venture  capital  markets were  as 
deep,  more  than  EUR  90  billion  of  funds  would  have  been  available  to  finance  companies 
between 2009 and 2014. If EU securitisations could be revived – safely – to pre-crisis average 
issuance levels, banks would be able to provide an additional amount of credit to the private 
sector of more than EUR 100 billion. And if SME securitisation was re-built to half the crisis 
peak it could generate EUR 20 billion of additional funding. Investment needs are also great – 
for example, it is estimated that for the EU's transition to a low carbon economy it will need 
EUR 200 billion of investment per year.1 

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.  

An action plan for a Capital Markets Union 

Following  the  consultations  that  began  in  February,  the  Commission  received  over  700 
responses. Feedback has been universally supportive of the importance of building a Capital 
Markets Union and the European Parliament2 and the Council3 both confirmed strong support 
for taking a step-by-step approach, and that the issues identified in our consultation were the 
right ones on which to concentrate.  

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  Commission  will  take 
forward  measures  to  remove  the  barriers  which  stand  between  investors'  money  and 
investment opportunities, and overcome the obstacles which prevent businesses from reaching 
investors. The system for channelling those funds will be made as efficient as possible, both 
nationally and across borders. 

As  the  closer  integration  of  capital  markets  and  gradual  removal  of  remaining  national 
barriers  could  create  new  risks  to  financial  stability,  we  will  support  actions  to  increase 
supervisory convergence, so that capital market regulators act in a unified way and strengthen 
the available tools to  manage systemic risks  prudently.  Based on the feedback and our  own 
analysis, the Commission will take forward action in the following priority areas: 

Providing more funding choices for Europe’s businesses and SMEs 

Barriers  to  Europe’s  business  raising  capital  markets  financing  exist  at  every  stage  of  the 
funding escalator and for public markets. These barriers limit smaller companies from raising 
equity and debt finance. The Commission will: 

  Modernise  the  Prospectus  Directive  to  make  it  less  costly  for  businesses  to  raise  funds 
publicly, review regulatory barriers to small firms listing on equity and debt markets and 
support the listing activities of small firms through European advisory structures; 

1   PRIMES, 2030 Impact Assessment. 
2   European Parliament resolution on Building a Capital Markets Union (2015/2634(RSP)). 
3   Council of the EU conclusions on a Capital Markets Union of 19 June. 

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  Launch a package of measures to support venture capital and equity financing in the EU, 
including catalysing private investment using EU resources through pan-European funds-
of-funds, regulatory reform, and the promotion of best practice on tax incentives; 

  Promote innovative forms of business financing such as crowd-funding, private placement, 
and  loan-orginating  funds  whilst  safeguarding  investor  protection  and  financial  stability; 
and 

  Explore  ways  to  build  a  pan-European  approach  to  better  connect  SMEs  with  a range  of 

funding sources. 

Ensuring  an  appropriate  regulatory  environment  for  long  term  and  sustainable 
investment and financing of Europe’s infrastructure 

Europe requires significant volumes of new long term sustainable investment to maintain and 
increase  competitiveness.  Public  support  through  measures  such  as  the  EUR  315  billion 
Investment  Plan  for  Europe  can  help,  but  further  measures  are  needed  to  unlock  private 
investment for the longer term. The Commission will: 

  Swiftly  revise  Solvency  II  calibrations  to  better  reflect  the  true  risk  of  infrastructure 
investment,  followed  by  a  review  of  the  treatment  under  the  Capital  Requirements 
Regulation for bank exposures to infrastructure; and 

  Assess  the  cumulative  impact  of  previous  regulatory  reforms  to  ensure  coherence  and 
consistency,  as  part  of  the  Commission's  initiative  on  Better  Regulation  and  building  on 
the  work  started  in  the  European  Parliament  in  2013  on  the  coherence  of  EU  financial 
services legislation. 

Increasing investment and choices for retail and institutional investors 

Retail  savings  held  directly  or  indirectly  through  asset  managers,  life  assurance  companies 
and  pension  funds  are  key  to  unlocking  capital  markets.  The  consultation  revealed  that  for 
retail investors saving for the future, greater investor confidence, transparency, certainty and 
choice  can  help  to  make  the  right  investments.  Europe’s  asset  management  industry  is 
generally working well, but more needs to be done to strengthen passporting and cross border 
competition. The Commission will: 

  Look at ways to boost choice and competition in cross-border retail financial services and 
insurance through a Green Paper published later this year. It will also assess the regulatory 
framework  for  retail  investment,  looking  particularly  at  improving  transparency  and  the 
quality  and  availability  of  investment  advice  against  the  backdrop  of  increased  on-line 
provision;  

  Explore  ways  to  increase  choices  for  retirement  saving  and  build  an  EU  market  for 
personal  private  pensions  which  pension  providers  could  opt  for  when  offering  private 
pensions across the EU; and 

  Deliver an effective European fund passport that eliminates cross-border fees and barriers 

to increase competition and consumer choice. 

Enhancing the capacity of banks to lend 

As lenders to a significant proportion of the economy and intermediaries in capital markets, 

5 

 
banks  will  play  a  central  role  in  the  CMU.  Banks  have  strong  local  relationships  and 
knowledge: bank lending will continue to be the main source of funding for many businesses 
alongside capital markets. The Commission will: 

  Revitalise simple, transparent and standardised European securitisations to free up capacity 
on  banks'  balance  sheets  and  provide  access  to  investment  opportunities  for  long  term 
investors; 

  Explore the possibility for all Member States to benefit from local credit unions to operate 

outside the scope of the EU's capital requirements rules for banks;  

  Assess  whether  and  how  to  build  a  pan-European  covered  bond  framework,  building  on 
national  regimes  that  work  well,  and  explore  the  feasibility  of  similar  funding  tools  for 
SME loans. 

Bringing down cross-border barriers and developing capital markets for all 28 Member 
States 

Despite progress in recent decades to develop a single market for capital, there are still many 
obstacles  that  stand  in  the  way  of  cross-border  investment.  These  range  from  obstacles  that 
have  origins in  national law, such  as insolvency, tax and securities law, to  obstacles arising 
from a fragmented market infrastructure. Therefore, we will: 

  Consult on the key insolvency barriers and take forward a legislative initiative on business 
insolvency, addressing the most important barriers to the free flow of capital and building 
on national regimes that work well; 

  Tackle  uncertainty  around  securities  ownership,  and  pursue  improvements  in  the 

arrangements for clearing and settlement of cross-border securities transactions; 

  Promote  the  development  of  capital  markets  in  all  28  Member  States,  as  part  of  the 
European  Semester  and  by  offering  Member  States  tailored  support  to  strengthen 
administrative capacity through the Commission's Structural Reform Support Service; 

  Work  with  the  European  Supervisory  Authorities  (ESAs)  to  develop  and  implement  a 
strategy to strengthen supervisory convergence and identify areas where a more collective 
approach can improve the functioning of the single market for capital; 

  Draw on the forthcoming European Systemic Risk Board (ESRB) review and international 
work, to ensure that national and European macro-prudential authorities have the tools to 
react appropriately to developments in capital markets. 

This  Action  Plan  sets  out  the  building  blocks  for  putting  a  well-functioning  and  integrated 
Capital Markets Union, encompassing all Member States, into place by 2019. This is a long 
term  project  but  we  will  move  quickly.  The  Commission  will  assess  achievements  and  re-
assess priorities in 2017. 

The  direction  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 
sparking a growing confidence for investing in Europe's future. The free flow of capital was 
one of the fundamental principles on which the EU was built. More than 50 years on from the 
Treaty of Rome, let us seize this opportunity to turn that vision into reality. 

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1.  THE  PATH  TO  GROWTH  –  FINANCING  FOR  INNOVATION,  START-UPS  AND  NON-LISTED 

COMPANIES 

New start-up companies are critical to driving growth in the economy. Across the EU, small 
and  medium-sized  enterprises  (SMEs)  employ  2  in  every  3  people  and  produce  58  cents  in 
every euro of value-added.4 Entrepreneurs with promising business plans need to be able to 
secure  financing  to  realise  their  ideas.  Successful  firms  will  need  access  to  financing  on 
attractive  terms  to  fund  their  expansion.  However,  funding  channels  for  growing  firms 
seeking to raise equity capital or look for other forms of credit outside the banking system are 
underdeveloped  in  Europe.  This  is  particularly  the  case  for  Europe’s  SMEs,  which  receive 
more than 75% of their external finance from bank loans. A successful Capital Markets Union 
(CMU)  should  broaden  the  range  of  financing  options  for  growing  companies.  These 
opportunities should exist and be available to entrepreneurs across all 28 EU Member States 
and across all stages of the 'funding escalator'. 

1.1. 

Financing the start-up phase 

Banks' strong local networks and relationships enable them to provide the majority of external 
financing  for  European SMEs.  In  recent  years,  to  complement  this,  an  increasing  variety  of 
non-bank financing options have also emerged to help companies. These range from money-
lending  and  donor  platforms,  businesses  trading  their  invoices,  peer-to-peer  lending,  to 
investment-based crowdfunding or support from business angels. 

Crowdfunding, for example, has been developing rapidly in some Member States.  There are 
now  more  than  500  platforms  providing  a  range  of  services  in  the  EU.5  Given  the 
predominantly  local  dimension  of  these  activities,  those  Member  States  which  are  home  to 
most  crowdfunding  activity  are  taking  steps  to  clarify  the  conditions  for  this  new  business 
model.  Securities-based  crowdfunding  platforms  can  be  authorised  under  the  Markets  in 
Financial  Instruments  Directive  (MiFID)  and  benefit  from  a  passport  to  carry  out  regulated 
services  and  activities  throughout  the  EU.6  Currently,  there  is  no  EU  framework  which 
specifically  caters  for  lending-based  crowdfunding.  The  EU  should  strike  a  careful  balance 
between  the  objectives  of  investor  protection  and  continued  expansion  of  crowdfunding. 
Premature regulation could hamper, not foster, the growth of this fast-growing and innovative 
funding  channel.    The  Commission  set  up  a  Crowdfunding  Stakeholder  Forum  to  support 
policy  development  in  this  area  and  launched  a  study  to  gather  and  analyse  data  on 
crowdfunding  markets across the EU and assess the impact of national legislation. Building 
on  existing  work7,  the  Commission  will  publish  a  report  on  the  development  of  European 
crowdfunding. 

The  Commission  will  assess  national  regimes  and  best  practice  and  monitor  the 
evolution  of  the  crowdfunding  sector.  Following  this  assessment,  the  Commission  will 
decide on the best means to enable the development of this new funding channel across 
the Union. 

4   European Commission (2014), Annual Report on European SMEs: A Partial and Fragile Recovery, p. 24. 
5   Estimation based on data from 22 EU Member States in 2014. Source: Crowdsurfer Ltd and Ernst & Young 

6  

LLP, "Crowdfunding: Mapping EU markets and events study", 2015. 
If  the  crowdfunding  platform  is  authorised  as  an  investment  firm  and  complies  with  the  relevant  MiFID 
requirements. 

7   European  Securities  and  Markets  Authority,  Opinion  and  Advice  on  investment-based  crowdfunding, 
ESMA/2014/1378  and  ESMA/1560,  18.12.2014;  Opinion  of  the  European  Banking  Authority  on  lending-
based crowdfunding, EBA/Op/2015/03, 26.03.2015. 

7 

 
                                                 
Business angel investors are often experienced business people willing to offer financial and 
other  support  to  start-ups.  They  have  become  an  increasingly  important  source  of  equity 
capital at the seed and early stage of company formation. The amounts invested by European 
business  angels  remain  small8  –  EUR  357  million  in  2013,  of  which  more  than  half  was 
concentrated in only 3 EU Member States (the United Kingdom, Spain and France).9 Europe 
needs  a  stronger  network  of  business  angels,  capable  of  operating  across  EU  borders.  The 
Commission  will  continue  to  support  cross-border  networking  and  capacity  building  for 
business  angels,  with  a  particular  focus  on  Central  and  Eastern  Europe,  to  develop  cross-
border  platforms,  connecting  business  angels  with  innovative  SMEs  and  facilitating  match-
funding. 

1.2.  The early expansion phase 

Rapidly  expanding  firms,  with  high  growth  potential  but  limited  working  capital,  may 
encounter funding gaps at critical moments in their expansion. Bank overdrafts or short term 
borrowing  facilities  alone  often  cannot  meet  these  needs.  Responses  to  the  consultation 
identified  expansion  finance  as  the  stage  where  the  EU  financial  system  underperforms  the 
most.  As  these  firms  have  the  potential  to  grow  into  future  large  employers,  the  missed 
opportunities for the EU society can be very large.10 

Venture  capital  has  a  key  part  to  play  in  supporting  growth  and  offering  entrepreneurs  an 
option to raise funding in Europe as well as from overseas. Venture capital is typically long-
term (equity) capital, channelled through funds which pool investor interest and diversify risk. 
However, EU venture  capital funds remain relatively small.  At around EUR 60  million, the 
average European venture capital fund is only half the size of that in the US, and around 90% 
of  EU  venture  capital  investment  is  concentrated  in  only  8  Member  States.11    Public  sector 
risk sharing can help to increase the scale of venture capital funds in Europe and the industry's 
footprint  across  all  28  Member  States,  as  well  as  acting  as  a  catalyst  for  private  sector 
investment, helping to promote scale, diversification and geographical reach. The promotion 
of  funds-of-funds  could  in  particular  help  broaden  private  investment  in  venture  capital  by 
attracting institutional investors. 

EU  legislation  has  attempted  to  establish  the  regulatory  conditions  for  a  successful  EU 
venture capital sector. The Regulation on European Venture Capital Funds (EuVECA)12 and 
the Regulation on European Social Entrepreneurship Fund (EuSEF)13 in particular define the 
conditions  under  which  these  funds  can  be  marketed  to  institutional  and  high  net  worth 
individuals  across  the  EU.  However,  the  EuVECA  and  EuSEF  passports  are  currently 
available  only  to  smaller  fund  operators  managing  asset  portfolios  below  EUR  500  million. 
Changes to these regulations could enhance the effectiveness of the passports by, for example, 

8   Not  all  of  business  angel  investment  is  directly  measurable.  Some  estimates  consider  that  total  angel 
investment  might  be  greater  than  venture  capital  investment  in  some  European  countries  with  well-
developed angel markets - see OECD (2011), Financing High-Growth Firms: The Role of Angel Investors. 

9   Source: EBAN Statistics Compendium 2014. Data is available for 21 Member States. 
10   Evidence  from  15  OECD  countries  for  2001-11  shows  that  young  businesses  play  a  crucial  role  in 
employment  creation.  Young  firms  systematically  create  more  jobs  than  they  shed.  In  particular,  young 
firms with fewer than 50 employees represent around 11% of employment and generally account for more 
than 33% of total job creation in the business sector, while their share in job losses is around 17%. (Source: 
OECD (2013), Science, Technology and Industry Scoreboard). 
11   Source: European Private Equity & Venture Capital Association. 
12   Regulation (EU) No 345/2013. 
13   Regulation (EU) No 346/2013. 

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allowing larger fund managers to establish and market EuVECA and EuSEF funds, reducing 
the  investment  threshold  in  order  to  attract  more  investors  and  expediting  cross-border 
marketing and investment. 

Tax  incentives  can  also  be  used  to  support  equity  financing,  in  particular  for  innovative 
companies  and  start-ups.14  The  Commission  will  study  how  national  tax  incentives  for 
venture  capital  and  business  angels  can  foster  investment  into  SMEs  and  start-ups  and 
promote best practice across Member States. 

Complementing  the  financing  provided  to  venture  capital  and  SMEs  under  the 
Investment  Plan,  the  Commission  will  take  forward  a  comprehensive  package  of 
measures  to  support  venture  capital  and  risk  capital  financing  in  the  EU.  This  will 
include amending the EuVECA and EuSEF legislation and proposals for a range of pan-
European venture capital funds-of-funds and multi-country funds, supported by the EU 
budget  to  mobilise  private  capital.  This  comprehensive  package  will  also  include  the 
promotion of best practices on tax incentives.   

Public authorities can also support financial institutions in setting up business growth funds to 
promote  SME  equity.  Sharing  of  best  practice  among  Member  States  on  how  to  set  up 
business growth funds would extend the benefits of these schemes to a wider range of SMEs. 
The  Commission  will  work  with  Member  States  and  prudential  supervisors  to  support  the 
development of industry-led business growth funds to support equity in SMEs. 

1.3. 

Supporting SMEs seeking finance 

The  information  gap  between  SMEs  and  investors  can  be  a  hurdle  to  non-bank  funding.  In 
particular,  search  costs  prevent  potential  investors  from  identifying  and  assessing  attractive 
companies in which to invest. There is a need, on the one hand, to make small firms in need 
of financing better aware of the market-based funding options available to them and, on the 
other, to make firms more visible to prospective local and pan-European investors. 

Signposting  the  availability  of  market-based  funding  options  for  SMEs  through  a  range  of 
Government-led and market-based means, is the first step. This communication could start by 
banks  providing  feedback  to  SMEs  on  the  reasons  for  refusal  to  grant  requested  credit15, 
which in some cases may be because there are more appropriate alternative funding options. 

Advisory  support  is  increasingly  available  through  a  number  of  private-  and  public-led 
schemes  in  some  Member  States16.  The  Commission  will  facilitate  an  exchange  of  best 
practice to promote the availability of effective sources of information and support for SMEs 
seeking market-based funding in all Member States.  

This  local  or  national  infrastructure  for  communicating  about  new  funding  opportunities 
could  serve  as  a  building  block  for  an  information  system  which  connects  prospective 
providers  of  external  finance  with  SMEs  seeking  finance  across  Europe.  Cross-border 
linkages could connect existing national systems to bring together investors and SMEs across 
Europe. A system linking national structures would preserve local level knowledge, important 

14   The Commission's State Aid guidelines for risk finance clarify conditions under which Member States can 

set up schemes promoting venture capital, 2014/C 19/04. 

15   As mandated by the latest Capital Requirements Regulation, Article 431 (4). 
16   Examples  include  Aktiespararna  (Sweden),  Médiateur  du  Credit  (France),  Better  Business  Finance  (UK), 

Investomierz (Poland), Industrie- und Handelskammern (Germany), amongst others. 

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in the SME sector, and allow SMEs to make available to investors at European level a set of 
core financial and credit data. A condition for such a system to add value would be sufficient 
comparability of key data, so that prospective investors across the EU have an accurate and 
reliable  insight  into  the  financial  standing  of  SMEs.  SME  participation  in  this  system  and 
provision  of  any  information  would  be  on  a  voluntary  basis.  A  recent  mapping17  of  SME 
credit information by the Commission revealed a high degree of diversity in the EU in terms 
of  what  information  is  shared,  by  whom,  how  it  is  shared  and  who  has  access  to  it. 
Standardisation  of  credit  data  will  be  facilitated  by  the  new  ECB  AnaCredit  database  on 
corporate loans which comes on line in 2018.  

The  Commission  will  take  forward  a  comprehensive  strategy  to  overcome  information 
barriers  that  prevent  SMEs  and  prospective  investors  from  identifying  funding  or 
investment opportunities through: 

  working with European banking federations and business organisations to structure 

the feedback given by banks declining SME credit applications; 

  working  with  the  Enterprise  Europe  Network,  to  map  existing  local  or  national 
support and advisory capacities across the EU in order to promote best practices on 
assisting SMEs which could benefit from alternative funding options; 

  building  on  work  by  the  ECB  and  in  Member  States,  investigate  how  to  develop  or 
support  pan-European  information  systems  that  link  up  national  systems  to  bring 
together  finance-seeking  SMEs  and  finance  providers  and  take  further  action,  as 
necessary. 

1.4.  Loan-originating funds  

Large  institutional  investors  or  investment  funds  may  invest  in  or  directly  originate  loans 
(sometimes  in  partnership  with  banks)  to  mid-sized  firms,  thus  providing  a  way  to  further 
diversify  credit  intermediation  and  increase  financing  opportunities.  According  to  some 
estimates,  as  of  the  end  of  2014,  over  350  transactions  were  completed  by  36  alternative 
lenders in just over two years. The volume of deals done by direct lending funds in Europe 
increased  43%  between  2013  and  2014.  There  are  now  40  active  direct  lending  funds  (up 
from 18 reported in 2012) and a further 81 new funds in the market looking to raise around 
EUR  70  billion.18  This  could  emerge  as  a  potentially  important  future  source  of  non-bank 
credit. 

EuVECA  and  European  Long  Term  Investment  Funds  (ELTIFs)19  can  to  a  limited  extent 
originate loans. Some Member States have also introduced bespoke regimes in their national 
legal  frameworks  to  frame  the  conditions  under  which  alternative  investment  funds  can 
originate loans. This situation results in funds operating cross-border needing to comply with 
different  requirements  for  their  loan-origination  activities.  Clarification  of  the  treatment  of 
loan-originating funds in the regulatory framework could facilitate cross border development 
whilst  ensuring  they  are  regulated  appropriately  from  an  investor  protection  and  financial 
stability perspective. 

17    See European Financial Stability and Integration Report, April 2015, Chapter 7. 
18   Source:  AIMA,  Financing  the  Economy:  The  role  of  alternative  asset  managers  in  the  non-bank  lending 

environment, May 2015. 

19   Regulation on European Long-term Investment Funds, PE-CONS 97/14, 20.03.2015. 

10 

 
                                                 
The Commission will work  with Member States and the ESAs to  assess the  need for a 
coordinated  approach  to  loan  origination  by  funds  and  the  case  for  a  future  EU 
framework.  

1.5. 

Private placements 

European  companies  increasingly  express  interest  in  using  'private  placement'  markets  for 
raising capital (typically in excess of EUR 20 million) through issuance of debt instruments to 
institutional  or  other  experienced  investors.  Due  to  the  restricted  number  and  type  of 
investors,  this  funding  channel  triggers  less  onerous  regulatory  requirements20.  Private 
placements in Europe increased by approximately 30% in 2014 - from EUR 13 billion in 2013 
to  17  billion  in  2014.21  However,  an  even  greater  volume  of  funds  was  raised  by  European 
companies  through  private  placement  on  US  markets.  European  private  placement  is  also 
limited to a small number of countries. Taken together, these considerations suggest that there 
is  potential  for  this  channel  to  develop  further  in  Europe.  The  Commission  has  previously 
identified 
to  further 
limited  standardised  processes  and  documentation  as  barriers 
development. The Commission is therefore fully supportive of the work by ICMA22 and the 
German Schuldscheine regime23 on these issues and will seek to draw on best practices and 
promote them across the EU through appropriate initiatives. 

20   52%  of  the  private  placement  deals,  excluding  those  in  the  German  Schuldscheine  market,  are  listed. 

Source: S&P First European Private Placement League Table, 2015. 

21   Source: S&P 
22   In  February  2015,  ICMA  published  the  Pan-European  Corporate  Private  Placement  Guide.  This  Guide 
promotes  the  use  of  standardised  documentation  produced  by  the  Loan  Market  Association  (governed  by 
English law) and the Euro-PP Working Group (governed by French law). This initiative focuses solely on 
corporate debt. 

23   For example, the German insurance industry, has developed a simple regime, acknowledged by BaFiN, that 
allows insurers to easily calculate a predefined set of financial indicators to assess creditworthiness, as well 
as to assess compliance with the capital requirements for private placement investments. 

11 

 
 
 
                                                 
2.  MAKING  IT  EASIER  FOR  COMPANIES  TO  ENTER  AND  RAISE  CAPITAL  ON  PUBLIC 

MARKETS 

Public offers of debt or equity instruments are the principal funding route for mid-sized and 
large companies seeking to raise in excess of EUR 50 million. They offer access to the widest 
set  of  funding  providers  and  provide  an  exit  opportunity  for  private  equity  and  business 
angels.  Public  markets  are  vital  for  the  transition  of  high  growth  mid-sized  companies  to 
established global  players.  For instance,  companies listed  on  the  AIM market24  have  shown 
on  average  a  turnover  growth  of  37%  and  an  employment  growth  of  20%  in  the  year 
following the IPO.25 Efficient public markets are therefore a critical link in the finance chain. 

While  European  public  equity  and  debt  markets  have  developed  significantly  in  recent 
decades, they still lag behind other developed economies. Moreover, the picture is very mixed 
across  EU  Member  States.  This  in  part  reflects  the  different  size  and  funding  needs  of 
companies,  as  well  as  preferences  for  continued  family  ownership  and  control  of 
corporations26.  The  CMU  consultation,  however,  also  highlighted  widespread  concerns  that 
the EU regulatory environment may not be conducive to further development of these funding 
channels. For example, the recent EU IPO Task Force report estimates the cost of listing fees 
alone  in  IPOs  of  deal  size  below  EUR  6  million  to  be  10-15%  of  the  deal  value.  In 
comparison,  for  larger  deals (EUR  50-100  million)  these  fees  are  about  5-8%.27  At  present, 
many  SMEs  consider  these  initial  (and  the  ongoing)  listing  costs  outweigh  the  benefits  of 
going  public.28  Reducing  entry  costs could  allow  more  companies  to  raise  capital  on  public 
markets.29 

The  gateway  to  public  markets  for  firms  seeking  funds  is  the  prospectus.  Prospectuses  are 
legally required documents presenting all information about a company needed by investors 
to  make  informed  decisions  about  whether  to  invest  or  not.  Prospectus  requirements  have 
been  harmonised  to  enable  the  comparison  of  investment  opportunities  across  the  EU.  But 
they are costly and onerous to produce, particularly for SMEs, and typically run to hundreds 
of  pages.  For  investors,  they  can  be  complex  and  excessively  detailed,  and  the  information 
which is critical for investment is hard to discern. 

The  Commission  will  modernise  the  Prospectus  Directive30.  This  will  update  when  a 
prospectus is needed, streamline the information required and the approval process, and 
create a genuinely proportionate regime for SMEs to draw up a prospectus and access 
capital markets. The Commission will also explore how to support SMEs with the listing 
process  through  European  advisory  structures,  such  as,  for  example,  the  European 
Investment Advisory Hub. 

24   An SME dedicated Multilateral Trading Facility (MTF) of the London Stock Exchange. 
25   Improving the market performance of business information regarding SMEs, ECSIP Consortium 2013. 
26   In  2009,  family  businesses  made  up  more  than  60  %  of  all  European  companies.  Source:  European 
Commission,  Final  Report  of  Expert  Group  –  overview  of  Family-Business  Relevant  Issues:  Research, 
Networks, Policy Measures and Existing Studies. 

27   EU IPO  Report issued by  the  European IPO  Task Force (European Issuers, EVCA  and  FESE), 23 March 

2015. 

28   Demarigny Report, An EU-listing Small Business Act, March 2010. 
29   A recent Oxera study shows that the average cost for investors seeking information on an investment is USD 

58 in the US versus EUR 430 in the EU. 

30   As part of the Commission's REFIT programme for simplification and regulatory burden reduction. 

12 

 
                                                 
Beyond the prospectus, there are a range of other challenges to raising capital publicly. SME 
Growth Markets,  introduced  by MiFID II, will from 2017 provide a stepping-stone for new 
companies to prepare for eventual listing on a larger exchange. The creation of this dedicated 
market  may  be  particularly  relevant  for  developing  local  markets  or  young  issuers.  To  reap 
the  full  benefits  of  these  dedicated  platforms  for  the  CMU,  the  Commission  will  ensure 
through  the  implementation  of  MiFID  II  that  the  requirements  applying  to  them  strike  the 
right  balance  between  providing  sufficient  investor  protection  and  avoiding  unnecessary 
administrative burden. 

For investors, access to high growth SMEs on public market exchanges can be appealing due 
to potential returns and diversification benefits. Yet, they can be put off by poorer information 
sources and lower liquidity.31 Consultation responses highlighted a lack of research on SMEs 
by  investor  analysts32  and  additional  reporting  requirements  as  two  major  challenges  for 
SMEs  trying  to  list  on  public  market  exchanges.  Many  SMEs  admitted  to  trading  on 
multilateral trading facilities (MTFs) report financial information only on the basis of national 
accounting standards, which may not be sufficient to meet the needs of international investors 
due  to  the  lack  of  comparability.  The  Commission  will  also  explore  with  the  International 
Accounting  Standards  Board  (IASB)  the  possibility  of  developing  a  voluntary  tailor-made 
accounting solution, which could be used for companies admitted to trading on SME Growth 
Markets. 

The Commission will review the regulatory barriers to small firms for their admission to 
trading on public markets and work closely with the new SME Growth Markets under 
MiFID  II  to  ensure  that  the  regulatory  environment  for  these  incubator  markets  is  fit 
for purpose.  

For  larger  firms,  corporate  bonds  are  a  key  mechanism  for  raising  debt  finance  on  a  larger 
scale. Aided by historically low interest rates, total issuance by non-financial corporations of 
euro  denominated  corporate  bonds  nearly  doubled  between  2008  and  2014  to  EUR  340 
billion.33 

Despite  record  primary  issuance,  some  market  participants  have  raised  concerns  about  the 
limited  liquidity  in  secondary  markets,  which  makes  it  difficult  to  trade  in  and  out  of  these 
instruments.  Limited  liquidity  could  translate  into  higher  illiquidity  premiums  and  higher 
borrowing costs. If credit conditions were to deteriorate, some companies could quickly find 
it harder to access debt markets.  

The Commission will review the functioning of EU corporate bond markets, focusing on 
how  market  liquidity  can  be  improved,  the  potential  impact  of  regulatory  reforms, 
market developments and voluntary standardisation of offer documentation. 

The  creation  of  a  consolidated  tape  for  equities  as  of  2017  and  for  equity-like  financial 
instruments as of 2018, as required by MiFID II, will make it easier for regulators and market 

31   See Commission study: http://ec.europa.eu/growth/tools-

databases/newsroom/cf/itemdetail.cfm?item_id=7562&lang=en&title=Improving-the-market-performance-
of-business-information-services-regarding-listed-SMEs 

32   For  example,  the  consultation  response  of  APG  stated  that  50%  of  SMEs  listed  on  Euronext  Amsterdam, 
Brussels,  Paris  and  Lisbon  do  not  benefit  from  any  financial  research  and  16%  have  only  one  analyst 
covering them. 
33   Source: Bloomberg 

13 

 
                                                 
participants to obtain a better view of the market, which should increase the attractiveness of 
the EU capital markets as investment destinations. The Commission will continue to monitor 
developments in this area. 

Differences in the tax treatment of various financial instruments may impede efficient capital 
market  financing.  The  preferential  tax  treatment  of  debt,  resulting  from  the  deductibility  of 
interest  rate  payments,  is  at  the  expense  of  other  financial  instruments,  in  particular  equity. 
Addressing  this  tax  bias  would  encourage  more  equity  investments  and  create  a  stronger 
equity  base in  companies. Also, there are obvious benefits in terms of financial  stability, as 
companies with a stronger capital base would be less vulnerable to shocks. This is particularly 
true for banks. 

As  part  of  the  broader  work  being  taken  forward  on  the  Common  Consolidated 
Corporate  Tax  Base  (CCCTB),  where  a  new  proposal  will  be  prepared  in  2016,  the 
Commission will examine ways to address debt-equity bias. 

14 

 
 
 
3. 

INVESTING FOR THE LONG TERM, INFRASTRUCTURE AND SUSTAINABLE INVESTMENT 

Europe requires significant new long term and sustainable investment to maintain and extend 
its  competitiveness  and  shift  to  a  low-carbon  and  resource-efficient  economy.  The  Capital 
Markets  Union  will  support  investors  in  taking  well-informed  investment  decisions  and 
monitoring relevant risks. 

3.1. 

Improving the investment environment through the regulatory framework 

The regulatory framework is a significant factor in the decision making of investors for long 
term  investments  in  particular.  Large  institutional  investors  are  natural  providers  of  such 
funds. Insurance companies, pension funds and newly formed debt funds can benefit from the 
stable  revenue  streams  from  infrastructure  debt  that  match  longer-dated  liabilities.  Some 
banks  are  also  active  participants  in  infrastructure  financing  alongside  national  promotional 
banks.  

Until  recently,  cross-border  infrastructure  investment  has  been  hampered  by  the  absence  of 
commonly  recognised  vehicles  for  capital-raising  and  investing.  The  recently  adopted 
European  Long  Term  Investment  Fund  (ELTIF)  Regulation,  which  will  start  applying  from 
December  2015,  creates  a  new  cross-border  fund  vehicle  for  such  long  term  projects  (e.g., 
energy,  transport  and  communication  infrastructures;  industrial  and  service  facilities;  and 
housing). The ELTIF Regulation combines the advantages of a cross-border passport with the 
possibility  of  raising  long  term  capital  from  smaller  investors  (local  pension  plans, 
municipalities, corporate pension plans, etc.), including retail investors.34 The Regulation will 
give asset managers a new opportunity to provide investors with access to a far wider range of 
assets, including infrastructure, than was otherwise possible under the pre-existing regulatory 
framework.  National  tax  treatments  will  be  important  for  the  take-up  of  ELTIFs,  and  the 
Commission  urges  Member  States  to  grant  them  the  same  tax  treatment  as  similar  national 
schemes. 

A  critical  regulatory  issue  concerns  the  absence  of  a  distinct  and  suitably  calibrated 
calculation  of  the  regulatory  capital  that  institutional  investors  should  hold  against 
infrastructure  investments.  The  Commission  will  propose  a  definition  of  infrastructure 
investments  that  offers  predictable  long-term  cash  flows  and  whose  risks  can  be  properly 
identified,  managed  and  monitored  by  insurers.  This  common  definition  will  allow 
infrastructure to be treated as a dedicated asset class and enable adjustments to the regulatory 
framework, where justified.  

Banks  also  remain  important  in  providing  or  arranging  loans  for  infrastructure  projects.  In 
July  2015  the  Commission  published  a  consultation  paper  on  the  potential  impact  of  the 
Capital  Requirements  Regulation  (CRR)35  and  the  Capital  Requirements  Directive  (CRD 
IV)36 on bank lending to the economy which includes a review of banks’ capital requirements 
for long term and infrastructure finance. The objective is to gain a better understanding of the 
impact  of  the  new  rules  on  capital  requirements  on  the  availability  of  financing  for 
infrastructure and other investments that support sustainable long-term growth. 

34   Managers  authorised  under  AIFMD  and  domiciled  in  the  EU  can  run  these  funds  to  invest  in  long  term, 
illiquid  or  hard-to-sell  assets  such  as  infrastructure  projects  and  SMEs  that  need  stable  financing  for  a 
number  of  years.  In  return,  these  assets  are  likely  to  pay  an  'illiquidity  premium',  that  is  higher  or  more 
stable returns which make up for investors' inability to get their money before a predetermined date. 

35   Regulation (EU) No 575/2013 
36   Directive 2013/36/EU . 

15 

 
                                                 
To  facilitate  the  funding  of  infrastructure  and  sustainable  long  term  investment  in 
Europe, the Commission is presenting revised calibrations in Solvency II to ensure that 
insurance companies are subject to a regulatory treatment which better reflects the risk 
of infrastructure and ELTIF investments. The Commission will complete the review of 
the CRR and make changes on infrastructure calibrations, if appropriate. 

3.2. 

Supporting long term and infrastructure financing 

The  scale  of  the  crisis  and  the  nature  of  the  recovery  have  left  a  large  infrastructure 
investment gap in the EU economy. The European Investment Bank (EIB) estimates that the 
total cumulative infrastructure investment needs in the EU could reach up to EUR 2 trillion 
for the period up to 2020.37  

Institutional  and  other  private  investors  can  be  an  important  source  of  funding  for 
infrastructure investments as these investments can offer stable returns and a relatively strong 
credit performance history.38 There are signs that these investors are increasingly looking to 
invest  in  infrastructure  projects.  For  the  most  ambitious,  long-term  and  transformative 
projects, public intervention is often needed to kick start the process.39  

Under the Investment Plan, the European Fund for Strategic Investments (EFSI) will mobilise 
EUR 315 billion of new, additional investments in the EU between 2015 and 2017 – of which 
EUR 240 billion will be directed towards infrastructure and innovation projects. A European 
Investment Project Portal will enable EU based project promoters to connect and share their 
investment projects and ideas with potential investors, and a European Investment Advisory 
Hub  (EIAH)  will  offer  a  single  point  of  entry  for  guidance  and  advice  supporting 
infrastructure investments in the EU. 

The  new  European  Fund  for  Strategic  Investments  (EFSI),  when  possible  together  with 
European  Structural  and  Investment  Funds  (ESI  Funds),  enables  a  variety  of  financing  and 
risk-sharing  options  through  the  use  of  innovative  financial  instruments  such  as  investment 
platforms or funds. The use of investment fund structures, including possibly in the form of 
ELTIFs which can raise capital from the retail investing public, or investment platforms under 
EFSI, can commingle public and private resources, and lead to better risk-return prospects. 

For  the  EFSI,  the  Commission  and  the  European  Investment  Bank  (EIB)  will  provide 
guidance  about  the  requirements  for  co-investment  structures  in  order  to  be  eligible  for 
support  by  the  Fund.  Moreover,  technical  assistance  will  be  available  under  the  EIAH  to 
investors that wish to explore the use of such structures. Beyond this, the Commission stands 
ready  to  work  with  private  investors  to  support  the  pooling  of  private  and  EU  resources  in 
order to increase financing for infrastructure investments and sustainable growth. 

37   See EIB working paper, 2013/02, Private Infrastructure Finance and Investment in Europe, page 11. 
38   A  global  study  of  default  and  recovery  rates  between  1983  and  2012  by  Moody's  shows  that  the  10-year 
cumulative  default  rate  for  the  infrastructure  sector  is  6.6%.  This  is  lower  than  for  project  finance  bank 
loans. In addition, the recovery rate on defaulting infrastructure loans is also high (up to 80%). 

39   For example in 2013, the total EU-28 public infrastructure investment was EUR 450 billion. Of this amount, 
public  investments  accounted  for  90%  and  private  investments  (including  public-private  partnerships) 
accounted for roughly 10%, EIB Working Paper 2013/02, page 7. 

16 

 
                                                 
3.3.  Harnessing finance to deliver environmental sustainability 

Efficient  financial  markets  can  help  investors  to  make  well  informed  investment  decisions, 
and  analyse  and  price  long  term  risks  and  opportunities  arising  from  the  move  towards  a 
sustainable  and  climate  friendly  economy.  This  shift  in  investment  can  contribute  towards 
delivering  the  2030  climate  and  energy  policy objectives  and  the  EU's  commitments  on  the 
Sustainable Development Goals. In particular, the recent emergence of Environmental, Social 
and Governance (ESG) bonds can help to direct capital towards sustainable investments: 2014 
saw exponential growth in green bond issuance - EUR 35 billion compared to EUR 8 billion 
in 2013 and less than EUR 1 billion in 2012. The rapid growth in this market is being assisted 
by  market-driven  standardisation  that  takes  into  account  project  selection  criteria  developed 
by  international  financial  institutions,  such  as  the  World  Bank,  the  EIB  and  the  European 
Bank for Reconstruction and Development (EBRD). Market participants are also developing 
voluntary  guidelines,  known  as  'Green  Bond  Principles’,  to  promote  transparency  and 
integrity in the development of the green bond market, and clarify qualification of issuance as 
a  'green  bond'.  The  Commission  will  continue  to  assess  and  support  these  and  other 
developments  in  ESG  investments,  monitor  the  need  for  EU  green  bond  standards,  to  help 
investors benefit from a more long term sustainable approach to investment decisions. 

3.4.  Call for evidence on existing regulatory framework  

The  EU  has  taken  essential  steps  as  part  of  an  international  consensus  to  restore  financial 
stability  and  public  confidence  in  the  financial  system.  It  is  important  that  EU  legislation 
strikes the right balance between reducing risk and enabling growth and does not create new 
barriers  that  were  not  intended.  With  this  in  mind,  the  Commission  is  launching  a 
comprehensive  review,  in  parallel  with  this  Action  Plan,  of  the  cumulative  impact  and 
coherence of the financial legislation adopted in response to the financial crisis. The purpose 
of this review is to assess the overall coherence of the existing framework. Given the different 
pieces of legislation adopted over the past years and the numerous interactions between them, 
there  is  a  risk  that  their  collective  impact  may  have  some  unintended  consequences,  which 
may not be picked up within individual sectoral reviews. Regulatory consistency, coherence 
and  certainty  are  key  factors  for  investor  decision-making.  If  clear  evidence  is  provided  to 
justify  specific  and  targeted  changes,  this  could  further  help  to  improve  the  investor 
environment and meet the objectives of the CMU. 

Building on the work of the European Parliament and international bodies, such as the 
Financial  Stability  Board  and  the  Basel  Committee  on  Banking  Supervision,  the 
Commission is today launching a call for evidence to evaluate the interactions between 
rules and the cumulative impact of the financial reform on the investment environment. 

17 

 
 
 
4.  FOSTERING RETAIL AND INSTITUTIONAL INVESTMENT 

The CMU aims to put European savings to better use, improving the efficiency through which 
savers  and  borrowers  are  matched,  and  increasing  the  economic  performance  of  the  EU 
economy.40  Greater  investor  confidence  and  certainty  can  help  investors  to  make  the  right 
investment  decisions.  It  is  widely  accepted  that  due  to  increasing  life  expectancy  and 
changing  demographics,  retail  investors  need  to  save  more  to  meet  their  retirement  needs. 
Meanwhile, many institutional investors, operating in a low interest rate environment, cannot 
find sufficient investments that deliver the returns needed to meet their commitments. 

4.1.  Retail investors 

Today,  retail  investors  in  Europe  have  significant  savings  in  bank  accounts,  but  are  less 
directly  involved  in  capital  markets  than  in  the  past.  Direct  share  ownership  of  European 
households  has  dropped  from  28%  in  1975  to  10-11%  since  2007  41  and  the  proportion  of 
retail  investors  among  all  shareholders  is  less  than  half  the  level  it  was  in  the  1970s. 
Removing the barriers to retail investors saving via the capital markets requires competitive 
financial markets that can offer choice to allow customers to compare products and find the 
most suitable savings vehicles at competitive prices. To further promote transparency in retail 
products, the Commission will ask the European Supervisory Authorities (ESAs) to work on 
the  transparency  of  long  term  retail  and  pension  products  and  an  analysis  of  the  actual  net 
performance and fees, as set out in Article 9 of the ESA Regulations.  

By  the  end  of  2015,  the  Commission  will  publish  a  Green  Paper  on  retail  financial 
services and insurance that will seek views on how to increase choice, competition and 
the  cross-border  supply  of  retail  financial  products,  as  well  as  the  impact  of 
digitalisation on retail financial services.  

As only occasional buyers of investment products, it is difficult for retail investors to build up 
relevant  knowledge  or  experience  in  capital  markets.42  While  restoring  the  trust  of  retail 
investors in capital markets is primarily the responsibility of the finance industry, regulation 
and supervision can help to establish the 'rules of the game'. 

Better information and advice are preconditions if retail investors are to be encouraged back 
into market-based financing. A first step is through transparency. Access to meaningful and 
high-quality information should be provided in a comparable and transparent manner across 
investment  products  –  including  on  the  key  features  of  the  products  (e.g.,  costs,  possible 
returns  and  risks).  In  recent  years,  the  EU  has  made  significant  progress  in  improving 
disclosure requirements across all sectors. New disclosure requirements have been introduced 
through different legislative measures.43 Some of the detailed implementing rules are still in 
preparation and will progressively enter into force in the coming years. To ensure that recent 
legislative reforms fulfil their objectives, a comprehensive assessment of the effectiveness of 

40   For  example:  see  Oliver  Wyman  (2012)  report,  The  real  financial  crisis:  why  financial  intermediation  is 

failing; IPO Task Force report, Rebuilding IPOs in Europe, 23 March 2015. 

41    OEE, IODS (2012): Who owns the European economy? Evolution of the ownership of EU listed companies 

between 1970 and 2012. 

42   In 2013 only 35% of retail investors trusted investment services' providers to respect consumer protection 

rules. European Commission (2013), Market Monitoring Survey, 2010-2013. 

43   Directive  2014/91/EU;  Regulation  (EU)  No  1286/2014;  Directive  2014/65/EU;  Insurance  Distribution 
Directive  (IDD),  10747/15;  Directive  2009/138/EC  and  the  Commission  proposal  for  a  Regulation  on 
reporting and transparency of securities financing transactions (SFTR), COM/2014/040 final. 

18 

 
                                                 
this  new  disclosure  landscape  could  help  to  ensure  consistency,  identify  possible  gaps  or 
unnecessary  duplications,  and  serve  as  a  basis,  where  needed,  for  a  streamlining  of 
requirements.  

To  better  mobilise  savings  channelled  through  capital  markets,  retail  investors  should  also 
have easy access to a range of suitable and cost-effective investment products and affordable 
and  independent  advice.  Some  consultation  responses  underlined  that  retail  investors 
currently receive limited rewards for assuming the higher risks associated with market-based 
investments  because  of  large  intermediation  and  distribution  fees.  Legislation  in  MiFID  II, 
Packaged  Retail  and  Insurance-based  Investment  Products  (PRIIPs)  and  Insurance 
Distribution  Directive  (IDD)  brings  in  important  changes  in  the  rules  governing  investment 
advice and product disclosure. The transition to online distribution of investment products and 
the  emergence  of  new  fintech  solutions  present  an  opportunity  to  develop  further  advisory 
services and "open access" online distribution platforms. It will be important to ensure these 
changes are accompanied by a critical assessment of the investment solutions and outcomes 
that are proposed to retail investors. 

The Commission will  undertake a comprehensive assessment of  European markets for 
retail  investment  products,  including  distribution  channels  and  investment  advice, 
drawing  on  expert  input.  The  assessment  will  identify  ways  to  improve  the  policy 
framework  and  intermediation  channels  so  that  retail  investors  can  access  suitable 
products  on  cost-effective  and  fair  terms.  The  assessment  will  examine  how  the  policy 
framework  should  evolve  to  benefit  from  the  new  possibilities  offered  by  online  based 
services and fintech. 

European  households  face  a  number  of  challenges  to  save  efficiently  towards  adequate 
pensions44  in  the  context  of  increased  longevity,  fiscal  pressures  at  individual  country  level 
and protracted low interest rates. To this end, the Commission is supporting the development 
of collective and individual pension plans to complement public pension schemes. 

The EU financial system needs to support people in making provision for their own personal 
retirement  savings.  It  can  do  this  through  policy  measures  aimed  at  incentivising  and 
removing obstacles to the development of individual ('third pillar') pension plans in Europe. 

At present, no effective single market for 'third pillar' personal pensions exists. A patchwork 
of  rules  at  EU  and  national  levels  stands  in  the  way  of  the  full  development  of  a  large  and 
competitive market for personal pensions.45 Market fragmentation prevents personal pension 
providers  from  maximising  economies  of  scale,  risk  diversification  and  innovation,  thereby 
reducing choice and increasing cost for pension savers. An 'opt in' European Personal Pension 
could  provide  a  regulatory  template,  based  on  an  appropriate  level  of  consumer  protection, 
that  pension  providers  could  elect  to  use  when  offering  products  across  the  EU.  A  larger, 
'third pillar' European pension market would also support the supply of funds for institutional 
investors and investment into the real economy. 

The  Commission  will  assess  the  case  for  a  policy  framework  to  establish  a  successful 
European market for simple, efficient and competitive personal pensions, and determine 
whether EU legislation is required to underpin this market.   

44   The 2015 Pension Adequacy Report: current and future income adequacy in old age in the EU, forthcoming. 
45   An overview of the current market and regulatory framework is provided in EIOPA's consultation paper on 

the creation of a standardised pan-European personal pension product of 3/7/2015.  

19 

 
                                                 
4.2. 

Institutional investors 

Institutional  investors,  in  particular  life  insurance  companies  and  pension  funds,  are  natural 
long term investors. However, in recent years they have been retrenching from investment in 
long  term  projects  and  companies.  The  share  ownership  of  insurers  and  pension  funds 
dropped from more than 25% of the EU stock market capitalisation in 1992 to 8% at the end 
of 2012.46 At present, they typically hold a large share of their portfolio in a relatively narrow 
range of assets. The EU should support institutional investors to allow their exposure to long-
term assets and SMEs, while maintaining sound and prudent asset-liability management. 

Prudential regulation affects the appetite of institutional investors to invest in specific assets 
through the calibration of capital charges. The Commission will introduce more risk sensitive 
calibrations  for  infrastructure  and  ELTIFs  (see  Chapter  3)  and  for  simple  and  transparent 
securitisation  products  (see  Chapter  5).  Beyond  these  measures,  consultation  feedback  also 
highlighted the prudential treatment of private equity and privately placed debt in Solvency II 
as an impediment to investing in these asset classes.  

The  Commission  will  assess  whether  changes  are  warranted  and,  if  so,  prepare 
amendments which could be brought forward in the context of the Solvency II review. 

Investment funds increased their share of ownership of EU stock markets from less than 10% 
in  the  1990s  to  21%  in  2012.  They  have  also  become  an  increasingly  important  holder  of 
corporate  bonds  in  recent  years.  These  funds  are  among  the  most  active  cross-border 
investors,  but  market  fragmentation  is  still  a  prevalent  issue  in  the  European  asset 
management  sector.  Many  respondents  to  the  consultation  argued  that  a  number  of  factors 
restrict  cross-border  activity  of  these  funds,  including  discriminatory  tax  treatment,  varying 
national  requirements  on  the  marketing  of  funds  and  fees  for  cross-border  notifications. 
Eliminating  unjustified  barriers  would  incentivise  fund  managers  to  engage  more  in  cross-
border marketing of their funds and reduce costs for investors. 

The  Commission  will  gather  evidence  on  the  main  barriers  to  the  cross-border 
distribution  of  investment  funds.  This  would  include  in  particular  disproportionate 
marketing requirements, fees, and other administrative arrangements imposed by host 
countries and the tax environment. Based on the evidence provided, the Commission will 
seek to eliminate key barriers, through legislative means if necessary. 

46   Source:  Final  Report:  Who  owns  the  European  economy?  Evolution  of  the  ownership  of  EU-Listed 
companies  between  1970  and  2012,  by  Observatoire  de  l'Epargne  Européenne  and  Insead  OEE  Data 
Services, August 2013 

20 

 
 
 
                                                 
5.  LEVERAGING BANKING CAPACITY TO SUPPORT THE WIDER ECONOMY 

As lenders to a significant proportion of the economy and intermediaries in capital markets, 
banks  will  play  an  important  role  in  the  CMU  and  in  the  wider  European  economy.  Banks 
have  strong  local  relationships  and  knowledge  that  mean  for  many  small  businesses,  bank 
lending  will  continue  to  be  an  important  source  of  funding.  For  other  firms,  access  to  bank 
finance will remain important as part of their diversification of funding options. Therefore, in 
parallel  to  the  work  on  the  CMU,  the  Commission  is  reviewing  the  regulation  of  banks  in 
order to ensure the optimal balance between managing risk and enabling growth.47 

For  smaller  companies,  strong  local  networks  are  important  in  supporting  growth.  Credit 
unions, in which for example SMEs can finance each other on a not-for-profit basis, operate 
in some Member States. They can also facilitate the exchange of know-how among members. 
The  application  of  sophisticated  and  complex  banking  regulation  may  at  times  constitute  a 
disproportionate obstacle to credit unions and other not-for-profit cooperatives serving SMEs. 
This may particularly be the case when they are small and focused principally on taking funds 
from and redistributing them among members, so that the risks for the wider financial system 
remain limited.  

Credit Unions in certain Member States are already exempted from the CRD regulatory 
framework. To ensure a level playing field, all Member States should be able to benefit 
from credit unions, which are subject to national regulatory safeguards commensurate 
with the  risks  that  they incur.  To this end, the Commission  will  explore the  possibility 
for all Member States to authorise credit unions which operate outside the EU's capital 
requirements framework for banks. 

Securitisation  can  increase  the  availability  of  credit  and  reduce  the  cost  of  funding.  As  a 
funding tool, securitisation can contribute to a well-diversified funding base. It can also act as 
an  important  risk-transfer  tool  to  improve  capital  efficiency  and  allocate  risk  to  match 
demand. 

Following  the  crisis,  EU  securitisation  markets  remain  significantly  impaired,  damaged  by 
concerns  surrounding  the  securitisation  process  and  the  risks  involved.  While  these 
weaknesses  manifested  themselves  primarily  via  securitisations  based  on  US  sub-prime 
loans48, the regulatory reform response that followed applied to all securitisations. There is no 
intention  to  undo  EU  reforms  addressing  the  risks  inherent  in  highly  complex  and  opaque 
securitisations. However, it is important that securitisation is revived to ensure that it can act 
as  an  effective  funding  channel  to  the  wider  economy  and  mechanism  to  diversify  risks. 
Under  the  Investment  Plan,  the  Commission  is  already  providing  financial  support  to 
securitisation operations. New legislative proposals, adopted today, will go further. They will 
better  differentiate  simple,  transparent  and  standardised  (STS)  products  to  support  investor 
confidence  and  reduce  due  diligence  burdens.  Building  on  advice  from  the  EBA,  the 
Commission  will  also  propose  more  appropriate  prudential  requirements  for  banks'  and 
insurers'  investments  into  STS  products.  This  package  of  measures  should  help  to  free  up 
capacity on banks' balance sheets and increase their ability to lend to the wider economy and 
contribute to building a more long term investor base. 

47   http://ec.europa.eu/finance/consultations/2015/long-term-finance/docs/consultation-document_en.pdf 
48   At the height of the crisis, the worst-performing EU securitisation products rated AAA defaulted in 0.1% of 
the  cases.  In  comparison,  their  US  equivalent  defaulted  16%  of  the  times.  Riskier  (BBB-rated)  EU 
securitisation also performed very well, with worst-performing classes defaulting in 0.2% of the cases at the 
height of the crisis. The default rate of BBB-rated US securities reached instead 62%. Source: EBA. 

21 

 
                                                 
The  Commission  is  publishing  today  a  proposal  for  an  EU  framework  for  simple, 
transparent  and  standardised  (STS)  securitisation,  together  with  new  prudential 
calibrations  for  banks  in  CRR.  Equivalent  calibrations  for  insurers  through  an 
amendment to the Solvency II Delegated Act to incorporate the STS criteria will follow 
as soon as the STS framework has been adopted. 

Covered  bonds  are  another  funding  tool  of  particular  importance  in  some  Member  States. 
However, the covered bond market is currently fragmented along national lines. The disparity 
between  the  legal  frameworks  and  supervisory  practices  of  the  Member  States  that  have 
enacted  dedicated  covered  bond  laws  limit  possibilities  for  market  standardisation  in 
underwriting and disclosure practices. This may result in obstacles to market depth, liquidity 
and  investor  access,  in  particular  on  a  cross-border  basis.  An  EU  framework  for  a  more 
integrated  covered  bond  market  could  help  reduce  the  cost  of  funding  for  banks  issuing 
covered bonds, in particular in certain Member States. 

The  Commission  is  publishing  today  a  consultation  on  the  development  of  a  pan-
European  framework  for  covered  bonds,  building  on  national  regimes  that  work  well 
without disrupting them and based on high-quality standards and best market practices. 
The  consultation  will  also  seek  views  on  the  use  of  similar  structures  to  support  SME 
loans.  

22 

 
 
 
6.  FACILITATING CROSS-BORDER INVESTING  

Despite significant progress in recent decades to develop a single market for capital, there are 
still  many  long-standing  and  deep-rooted  obstacles  that  stand  in  the  way  of  cross-border 
investments. These range from obstacles that have their origins in national law – insolvency, 
collateral and securities law – to obstacles in terms of market infrastructure, tax barriers and 
changes  in  the  regulatory  environment  that  undermine  the  predictability  of  rules  for  direct 
investments.  Cross-border  risk  sharing  within  the  EU  has  weakened  since  the  start  of  the 
crisis and investment coming from outside the EU also declined over the same period. 

Removal of some of the long-standing barriers which deter investors from diversifying their 
geographical  portfolios  would  yield  significant  benefits  to  capital  raisers,  investors,  and  the 
EU  economy  as  a  whole.  More  integrated  EU  capital  markets  would  also  increase  the 
attractiveness of the EU Member States as investment destinations for third country investors. 

6.1.  Legal certainty and market infrastructure for cross-border investing 

Efficient  and  safe post-trade infrastructures  are the key elements  of well-functioning capital 
markets. One concern that featured prominently in the consultation responses is that securities 
ownership cannot currently be determined with legal certainty when the securities issuer and 
the  investor  are  located  in  different  Member  States  and/or  securities  are  held  by  financial 
institutions  in  different  Member  States.  These  situations  are  increasingly  common.  Many 
respondents to the Green Paper called for provisions to clarify which national law applies to 
any given cross-border securities transaction. To this end, the Commission plans to enhance 
and broaden existing rules in the field. A modernisation of the law is even more important in 
view of the expected increase in cross-border securities transactions stimulated by the launch 
of Target2-Securities (T2S).  

Moreover,  differences  in  the  national  treatment  of  third  party  effects  of  assignment  of  debt 
claims49  complicates  the  use  of  these  instruments  as  cross-border  collateral  and  makes  it 
difficult  for  investors  to  price  the  risk  of  debt  investments.  This  legal  uncertainty  frustrates 
economically  significant  financial  operations,  such  as  securitisations  which  require  robust 
collateral management. 

The  Commission  will  take  forward  early  targeted  work  on  uncertainty  surrounding 
securities  ownership.  On  the  basis  of  further  consultation  and  impact  assessment,  the 
Commission  will  also  propose  uniform  rules  to  determine  with  legal  certainty  which 
national law shall apply to third party effects of the assignment of claims. 

In recent years, EU legislation, such as European Markets Infrastructure Regulation (EMIR)50 
, Central Securities Depositories Regulation (CSDR)51  and MiFID II, has removed many of 
the  barriers  to  the  cross-border  clearing  and  settlement  of  securities.  However,  with  many 
provisions  yet  to  enter  into  force  and  the  recent  establishment  of  the  single  settlement 
platform T2S, the post-trade landscape is undergoing significant changes. These changes are 
driving  a  restructuring  of  the  post-trade  infrastructure  while  encouraging  innovative  market 
practices, particularly in the area of collateral management. Markets need to be monitored to 
ensure  that  legislation  keeps  pace  with  these  changing  practices,  while  simultaneously 
ensuring that the safety and efficiency of the post-trading system is not diminished. 

49   Where the original creditor transfers a debt claim to someone else. 
50   Regulation (EU) No 648/2012. 
51   Regulation (EU) No 909/2014. 

23 

 
                                                 
Despite  this  progress,  barriers  remain  to  efficient  cross-border  clearing  and  settlement  – 
including some of those identified by the Giovannini Report52 more than a decade ago. Many 
of these barriers have their origins in divergent national property and insolvency laws, as well 
as national laws regarding securities holdings which differ considerably in terms of the legal 
nature of the asset. These differences can give rise to uncertainty as to who owns a security in 
the event of a default and whose rights take precedence in the event of insolvency. However, 
uncertainty  on  such  fundamental  issues  poses  important  legal  risks,  for  example  to  the 
enforceability  of  collateral,  and  can  threaten  the  resilience  of  cross-border  settlement  and 
collateral flows.  

To support more efficient and resilient post-trading systems and collateral markets, the 
Commission  will  undertake  a  broader  review  on  progress  in  removing  Giovannini 
barriers to cross-border clearing and settlement, following the implementation of recent 
legislation and market infrastructure developments. 

6.2.  Removing national barriers to cross-border investment 

Consistency  in  application,  implementation  and  enforcement  of  the  legal  and  supervisory 
framework is pivotal to the free movement of capital and the creation of a level playing field. 
Now  that  a  significant  number  of  EU  financial  provisions  are  in  place  to  facilitate  cross-
border  investment,  the  focus  must  move  to  effective  implementation  and  enforcement. 
Barriers may have their origins in national legislation or administrative practice. Some relate 
to  national  "gold-plating"  of  EU  minimum  rules,  while  others  may  arise  from  divergent 
application  of  EU  rules.  Other  barriers  stem  from  national  measures  taken  in  areas  where 
there is no EU legislation or where responsibility remains at national level. 

For  those  barriers  not  addressed  through  other  actions,  including  through  supervisory 
convergence, the Commission will work with Member States to identify and dismantle them 
through a collaborative approach. The Commission will: 

  set  up  a  network  of  28 national contact  points  and  engage  in  bilateral  discussions  on  the 

potential for national action to lift barriers; 

  develop  best  practice,  scorecards,  recommendations  and  guidelines  based  on  the  work 

within the network. 

The  Commission,  working  with  Member  States,  will  map  and  work  to  resolve 
unjustified national barriers to the free movement of capital, stemming, amongst other 
things, from insufficient implementation or lack of convergence in interpretation of the 
single  rulebook  and  from  national  law  that  are  preventing  a  well-functioning  Capital 
Markets Union and publish a report by the end of 2016. 

Convergence  of  insolvency  and  restructuring  proceedings  would  facilitate  greater  legal 
certainty  for  cross-border  investors  and  encourage  the  timely  restructuring  of  viable 
companies  in  financial  distress.  Consultation  respondents  broadly  agreed  that  both  the 
inefficiency  and  divergence  of  insolvency  laws  make  it  harder  for  investors  to  assess  credit 
risk, particularly in cross-border investments. 

52   http://ec.europa.eu/internal_market/financial-markets/docs/clearing/second_giovannini_report_en.pdf 

24 

 
                                                 
The  2015  World  Bank  Doing  Business  Report  ranks  countries  on  the  strength  of  their 
insolvency frameworks on a scale of 0-16. The EU simple average is 11.6, which is 5% below 
the OECD average for high income countries (12.2). Some Member States score below 8. 

In 2014  the  Commission  published  a Recommendation53  on  a  new  approach  to  business 
failure  and  insolvency  which  encourages  Member  States  to  implement  early  restructuring 
procedures and  give  a "second  chance" to  entrepreneurs. The  Recommendation  sets  out 
common principles for national insolvency procedures for businesses in difficulties as well as 
measures  aimed  at  reducing  the  length  and  costs  of  proceedings  for  SMEs  (e.g.  use  of 
standard  forms,  use  of  distance  means  of  communication).  While  it  is  clear  that  the 
Recommendation has provided a useful focus for those Member States undertaking reforms in 
the area of insolvency, an assessment undertaken by the Commission shows that it has only 
been implemented partially, including in those Member States that have launched reforms.54 

The  Commission  will  propose  a  legislative  initiative  on  business  insolvency,  including 
early  restructuring  and  second  chance,  drawing  on 
the 
Recommendation. The initiative will seek to address the most important barriers to the 
free flow of capital, building on national regimes that work well. 

the  experience  of 

Tax  is  also  an  issue  of  high  importance  for  cross-border  investment  decision  making.  Two 
particular tax barriers to cross-border investment have been identified as particularly relevant 
in the context of the CMU. First, many investors underlined that they are currently penalised 
when  investing  cross-border  by  the  application  of  local  withholding  taxes  which  are  near 
impossible  to  reclaim,  in  addition  to  their  domestic  tax.  The  problem  stems  from  different 
national approaches in the application of withholding taxes and the complexity of procedures 
to  claim  relief  from  these  taxes.  The  potential  discriminatory  taxation  of  pension  funds  and 
life insurance companies is also a barrier to cross-border investment. 

To  encourage  Member  States  to  adopt  systems  of  relief-at-source  from  withholding 
taxes and to  establish quick and standardised refund procedures,  the  Commission  will 
promote  best  practice  and  develop  a  code  of  conduct  with  Member  States  on 
withholding  tax  relief  principles.  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.  

Currently, there are around 200 bilateral investment treaties between Member States ("intra-
EU  BITs")  which  set  varying  standards  of  treatment  for  cross-border  investment  within  the 
single  market  and  are  incompatible  with  EU  law.  The  Commission  has  recently  taken  legal 
action  against  these  intra-EU  BITs.  The  Commission  will  work  with  Member  States  to 
explore whether additional action is needed to further strengthen safeguards for cross-border 
investors and in doing so to reinforce the attractiveness of the single market as an investment 
destination. 

53   C(2014) 1500 final, 12.3.2014. 
54   Evaluation  of  the  implementation  of  the  Recommendation  on  a  new  approach  to  business  failure  and 

insolvency (http://ec.europa.eu/justice/civil/commercial/insolvency/index_en.htm) 

25 

 
                                                 
6.3. 

Promoting financial stability and supervisory convergence 

By promoting more diverse funding channels CMU will help to increase the resilience of the 
EU financial system.55 At the same time, there is a need to be alert to financial stability risks 
emerging  in  capital  markets.  In  recent  years,  the  EU  has  put  in  place  a  range  of  reforms  to 
make capital markets more transparent, well regulated and robust, including reducing risks in 
derivative  markets  through  EMIR,  introducing  safer  and  more  transparent  trading  rules  in 
MiFID  and  ensuring  all  alternative  fund  managers  in  the  EU  are  regulated  through  the 
AIFMD.  Further  reforms  are  in  train  through  the  Securities  Financing  Transactions 
Regulation  (SFTR)56,  the proposal  on  Money  Market  Funds and  the  forthcoming  legislative 
proposal  on  CCP  recovery  and  resolution.  The  FSB  is  prioritising  work  to  understand  and 
address vulnerabilities related to entities undertaking bank-like activities on capital markets. 
Ensuring a global regulatory approach to potential emerging systemic risks will both support 
financial stability and facilitate cross-border investment.  

The  Commission  will  work  with  the  FSB  and  ESAs  alongside  the  European  Systemic 
Risk  Board  (ESRB)  to  assess  possible  risks  to  financial  stability  arising  from  market-
based  finance.  Further  analytical  work  will  be  conducted,  for  example  to  better 
understand the issues of market liquidity and interconnectedness in the financial system, 
and  to  assess  if  additional  macro-prudential  instruments  should  be  developed.  The 
Commission will make any changes necessary to the macro-prudential framework in the 
context of the forthcoming ESRB review. 

With respect to supervision, feedback to the consultation was positive on the architecture that 
the EU put into place following the financial crisis in 2011. While progress has been made in 
establishing the European System of Financial Supervision and putting in place the single rule 
book,  consultation  respondents  also  emphasised  the  importance  of  ensuring  supervisory 
convergence  and  consistent  implementation  and  application  of  EU  financial  services 
legislation - an issue also highlighted in the Five Presidents' Report on Completing Europe's 
Economic and Monetary Union.  

Capital markets legislation adopted in recent years confers an important role on the ESAs in a 
number of areas. Consultation feedback called on ESMA in particular to play a stronger role 
in enhancing supervisory convergence in capital market regulation and market reporting, and 
ensure that the single rulebook is consistently applied across the EU. Efforts in recent years to 
build a single rulebook for capital markets should lead to more integrated and efficient capital 
markets.  Deeper  financial  integration  will  need  to  be  accompanied  by  increased  focus  by 
ESMA  on  achieving  convergence  of  supervisory  outcomes  across  the  EU,  including  on 
accounting,  to  ensure  that  the  single  market  works  well.  ESMA  could  focus  more  on 
identifying,  supporting  and  promoting  best  practice  to  ensure  the  effectiveness  of  the 
supervisory  techniques  of  Member  States  and  comparable  outcomes  throughout  the  EU.  In 
this  context,  ESMA  should  make  more  systematic  and  efficient  use  of  the  tools  it  has,  in 
particular thematic and country peer reviews.  

55   Speech of V. Constâncio, Vice President of the ECB. 
56   As  set  out  in  the  SFTR,  following  the  outcome  of  the  work  performed  by  relevant  international  fora  and 
with the assistance of ESMA, EBA and the ESRB, the Commission will report to the European Parliament 
and  the  Council  in  2017  on  progress  in  international  efforts  to  mitigate  the  risks  associated  with  SFTs, 
including on the FSB recommendations for haircuts on non-centrally cleared SFTs and their appropriateness 
for European markets. 

26 

 
                                                 
The  Commission  will  work  with  ESMA  to  develop  and  implement  a  strategy  to 
strengthen  supervisory  convergence  and  to  identify  areas  where  a  more  integrated 
approach can improve the functioning of the single market for capital. The Commission 
will also work with ESMA to enhance the effectiveness of its thematic and country peer 
review  decision-making.  The  Commission  will  publish  a  White  Paper  in  2016  on  the 
governance and the financing of the ESAs. 

The CMU is a classic single market project for the benefit of all 28 Member States. To 
help  capital  markets  deliver  their  full  potential,  the  Commission  will,  through  the 
Structural  Reform  Support  Service,  develop  a  strategy  for  providing  technical 
assistance  to  Member  States  where  needed  to  reinforce  specific  capacities  of  national 
capital markets. 

6.4. 

Facilitating international investment 

For EU capital markets to thrive, they will need to be open and globally competitive, and able 
to attract additional equity and debt investment from international investors. CMU will help to 
make  EU  capital  markets  more  attractive  to  international  investors  by  eliminating  legal  and 
administrative  cost  to  cross-border  operations,  and  enhancing  convergence  of  supervisory 
outcomes across Europe. Given the global nature of capital markets, Capital Markets Union 
must  take  account  of  the  wider  global  context  and  ensure  that  European  capital  markets 
remain an integral part of the international financial system. The Commission will continue to 
work closely with EU Member States and third countries in international fora such as the FSB 
and  IOSCO  to  develop  convergent  policy  responses  in  order  to  support  the  development  of 
global  capital  markets.  In  addition,  the  Commission  will  seek  to  establish  frameworks  for 
regulatory cooperation in financial services with key third countries to strengthen integration 
of capital markets.  

The EU's international trade and investment policy 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  an  appropriate  level  of  protection  and  a  level 
playing field for investors. The Commission will also continue to contribute to international 
work  on  the  free  movement  of  capital,  including  in  the  context  of  the  OECD  Codes  of 
Liberalisation of Capital Movements. 

27 

 
 
 
7.  NEXT STEPS AND MONITORING 

This Action Plan  set out the priority actions needed to encourage investment in all Member 
States  and  across  the  EU,  and  better  link  savings  with  growth.    The  preparation  of  the 
proposed  actions  will  be  subject  to  appropriate  consultation  and  impact  assessment  of  the 
range of options for achieving the objectives. 

The  successful  adoption  and  implementation  of  these  actions  will  require  a  sustained  and 
concerted  effort.  This  is  a  project  for  all  28  Member  States  and  the  Commission  will  work 
closely with them and the European Parliament to take forward these proposals. 

To build early momentum, concrete proposals are being announced today and others will soon 
follow.  First  actions  include  a  comprehensive  package  on  securitisation  with  updated 
calibrations for CRR, the definition of infrastructure and revised calibrations for Solvency II, 
and  a  proposal  to  review  the  Prospectus  Directive. In  other  areas,  further  consultation  with 
interested parties may be needed. In parallel, the Commission will facilitate discussions with 
Member States on items such as tax and insolvency to enable progress to be reached over the 
medium to long term. 

The  success  of  the  CMU  will  also  depend  on  market  participants.  Financial  intermediaries 
must  play  their  part  in  restoring  the  trust  of  their  clients  and  building  confidence  in  capital 
markets  in  Europe.    This  Action  Plan  includes  market-led  initiatives  and  the  Commission 
urges the relevant parties to prioritise progress in these areas. 

Furthermore,  the  Commission  will  continue  to  work  to  identify  the  main  inefficiencies  and 
barriers to deeper capital markets in Europe and work out how best to overcome them, whilst 
retaining a strong focus on investor protection and market supervision. 

In  addition  to  annual  reports,  the  Commission  will  prepare  a  comprehensive  stock-take  in 
2017 as a basis for deciding on any additional measures that may be required.  

The  Commission  will  report  regularly  to  the  European  Parliament  and  Member  States  on 
progress. 

28 

 
 
 
Annex 1: List of actions and indicative timeline 

Financing for innovation, start-ups and non-listed companies 

Proposal for pan-European venture capital fund-of-funds and multi-
country funds 

Revise EuVECA and EuSEF legislation 

Q2 2016 

Q3 2016 

Study on tax incentives for venture capital and business angels 

2017 

Strengthen feedback given by banks declining SME credit 
applications 

Map out existing local or national support and advisory capacities 
across the EU to promote best practices 

Investigate how to develop or support pan-European information 
systems 

Report on crowdfunding 

Develop a coordinated approach to loan origination by funds and 
assess the case for a future EU framework 

Support venture 
capital and equity 
financing 

Overcome 
information 
barriers to SME 
investment 

Promote innovative 
forms of corporate 
financing 

Making it easier for companies to enter and raise capital on public markets 

Proposal to modernise the Prospectus Directive 

Strengthen access to 
public markets 

Review regulatory barriers to SME admission on public markets and 
SME Growth Markets 

Review EU corporate bond markets, focusing on how market 
liquidity can be improved 

Support equity 
financing 

Address the debt-equity bias, as part of the legislative proposal on 
Common Consolidated Corporate Tax Base 

Investing for long term, infrastructure and sustainable investment 

Support 
infrastructure 
investment 

Ensure consistency 
of EU financial 
services rulebook 

Increase choice and 
competition for 
retail 

Help retail investors 
to get a better deal 

Adjust Solvency II calibrations for insurers' investment in 
infrastructure and European Long Term Investment Funds 

Review of the CRR for banks, making changes on infrastructure 
calibrations, if appropriate 

Call for evidence on the cumulative impact of the financial reform 

Q3 2015 

Fostering retail and institutional investment 

Green Paper on retail financial services and insurance 

Q4 2015 

EU retail investment product markets assessment 

2018 

29 

Q2 2016 

2017 

2017 

Q1 2016 

Q4 2016 

Q4 2015 

2017 

2017 

Q4 2016 

Q3 2015 

Ongoing 

 
Ongoing 

Q3 2015 

Support saving for 
retirement 

Assessment of the case for a policy framework to establish European 
personal pensions 

Q4 2016 

Expand 
opportunities for 
institutional 
investors and fund 
managers 

Assessment of the prudential treatment of private equity and privately 
placed debt in Solvency II 

2018 

Consultation on the main barriers to the cross-border distribution of 
investment funds 

Q2 2016 

Leveraging banking capacity to support the wider economy 

Strengthen local 
financing networks  

Explore the possibility for all Member States to authorise credit 
unions outside the EU's capital requirements rules for banks 

Build EU 
securitisation 
markets 

Support bank 
financing of the 
wider economy 

Remove national 
barriers to cross-
border investment 

Improve market 
infrastructure for 
cross-border 
investing 

Foster convergence 
of insolvency 
proceedings 

Remove cross-
border tax barriers 

Strengthen 
supervisory 
convergence and 
capital market 
capacity building 

Enhance capacity to 
preserve financial 
stability 

Proposal on simple, transparent and standardised (STS) 
securitisations and revision of the capital calibrations for banks 

Consultation on an EU-wide framework for covered bonds and 
similar structures for SME loans 

Q3 2015 

Facilitating cross-border investing 

Report on national barriers to the free movement of capital 

Targeted action on securities ownership rules and third-party effects 
of assignment of claims 

Review progress in removing remaining Giovannini barriers 

Q4 2016 

2017 

2017 

Legislative initiative on business insolvency, addressing the most 
important barriers to the free flow of capital 

Q4 2016 

Best practice and code of conduct for relief-at-source from 
withholding taxes procedures 

Study on discriminatory tax obstacles to cross-border investment by 
pension funds and life insurers 

Strategy on supervisory convergence to improve the functioning of 
the single market for capital 

White Paper on ESAs' funding and governance 

Develop a strategy for providing technical assistance to Member 
States to support capital markets' capacity 

Review of the EU macroprudential framework 

2017 

2017 

Ongoing 

Q2 2016 

Q3 2016 

2017 

30