COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS on the Mid-Term Review of the Capital Markets Union Action Plan
Date: 2017-06-08
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, investment aid, single market, small and medium-sized enterprises

EN 

   EN 

   EUROPEAN COMMISSION  Brussels, 8.6.2017  COM(2017) 292 final   COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS on the Mid-Term Review of the Capital Markets Union Action Plan {SWD(2017) 224 final} {SWD(2017) 225 final}  
 
 
1. 

INTRODUCTION 

The  Commission’s  top  priority  is  to  strengthen  the  EU  economy  and  stimulate 
investment to create jobs.  

To  strengthen  investment  for  the  long  term,  we  need  stronger  capital  markets.  These 
markets need to provide new sources of corporate financing and help increase investment 
options,  unlocking  the  concrete  benefits  of  the  Single  Market  for  EU  businesses  and 
to  well-established 
households.  EU  businesses,  from  start-ups  and  scale-ups 
multinationals,  need  access  to  a  wide  range  of  funding  sources,  to  invest  in  innovation 
and company expansion. Households need access to capital markets, to have more and 
better opportunities to invest for their future.  

The financial products and services required can be offered at more competitive terms by 
financial  institutions,  banks,  investment  firms  and  institutional  investors  operating  in 
large and  integrated capital  markets.  Capital markets  also have  the potential to  channel 
private funds towards more sustainable investment. 

The  EU  economic  recovery  is  gaining  momentum,  with  a  fifth  consecutive  year  of 
growth. There are, however, significant downside risks. The contribution of investment 
to  growth  remains  low  and  the  investment  rate  is  still  below  pre-crisis  levels.  This 
persistent weakness in investment continues to drag on the momentum of recovery and 
longer-term growth. 

That  is  why  President  Juncker  set  as  one  of  his  key  priorities,  the  need  to  build  a  true 
single market for capital — a Capital Markets Union (CMU) for all Member States.  

CMU reinforces the third pillar of the Investment Plan for Europe. It will offer benefits 
for all Member States, while also strengthening Economic and Monetary Union (EMU) 
by supporting economic and social convergence and helping absorb economic shocks in 
the  euro  area.  This  was  set  out  in  the  report  by  the  Five  Presidents  on  Completing 
Economic and Monetary Union. 

The European Parliament Resolution of 19 January 20161 acknowledged the important 
role  capital  markets  can  play  in  addressing  the  financing  needs  of  Member  State 
economies and underlined that CMU must place greater focus on the end-users of capital 
markets, i.e. companies and investors. 

More  recently,  a  number  of  new  challenges  to  financial  integration  have  arisen,  which 
impose a need to strengthen and transform the EU’s capital markets reform agenda.  

In particular, the future departure of the largest financial centre from the EU makes 
it  necessary  to  re-assess  how  CMU  can  ensure  that  EU  businesses  and  investors  have 
access  to  strong,  dynamic  and  more  integrated  capital  markets,  while  risks  to  financial 
stability are properly managed.  

1   Resolution  on  stocktaking  and  challenges  of  the  EU  Financial  Services  Regulation:  impact  and  the 
way  forward  towards  a  more  efficient  and  effective  EU  framework  for  Financial  Regulation  and  a 
Capital Markets Union (2015/2106(INI). 

2 

 
 
                                                 
This  calls  for  stronger  action,  more  effective  supervision  and  measures  to  ensure  the 
benefits of CMU are felt across the entire EU. CMU must also propose ways to harness 
the  transformative  power  of  financial  technology  and  to  shift  private  capital  towards 
sustainable investment. 

The  Reflection  Paper  on  the  Deepening  of  the  Economic  and  Monetary  Union 
(EMU)  of  31  May2  states  that  progress  on  CMU  is  paramount  to  help  provide  more 
innovative, sustainable and diversified sources of funding for households and businesses. 
It also stresses that, in order to succeed, the commitment of the European Parliament, the 
Council and all stakeholders is indispensable.  

The European Council of June 2016 called for ‘swift and determined progress to ensure 
easier access to finance for businesses and to support investment in the real economy by 
moving forward with the Capital Markets Union agenda.’3  

In September 2016, the Commission adopted a Communication calling for accelerated 
reform.4  

On  13 December  2016,  the  Joint  Declaration  by  the  European  Parliament,  Council  and 
Commission  on  the  EU’s  legislative  priorities  for  2017  included  the  initiatives  on 
creating safer and more transparent markets for securitisation and improved prospectuses 
for securities, to bring about CMU.5 

However, the Commission cannot build CMU alone. Its success will depend on the level 
of  political  commitment  from  the  Member  States,  the  European  Parliament  and  market 
participants.  

It  will  depend  how  businesses,  large  and  small  financial  service  providers  and 
institutional and retail investors use the building blocks. National authorities and market 
participants hold the key role to building the financial channels and market segments, as 
well  as  the  legal,  fiscal  and  technical  infrastructure  needed  to  dismantle  barriers  to  EU 
integration and develop a true Single Market for capital. 

The  Commission  is  committed  to  addressing  these  challenges.  That  is  why  this  review 
updates and complements the original agenda with new priority measures, drawing on the 
responses to the public consultation in January-March 2017.  

All proposals will be subject to the appropriate consultation and impact assessment will 
be carried out on the full range of options for achieving the objectives. 

2. 

IMPLEMENTING THE CMU AGENDA 

The challenges set out in the 2015 CMU Action Plan remain as relevant as ever. CMU is 
needed  because  banks  and  capital  markets  are  both  vital  components  of  the  financial 
system,  not  competing  but  complementing  each  other.  The  178  responses  to  the  public 

2   https://ec.europa.eu/commission/sites/beta-political/files/reflection-paper-emu_en.pdf 
3   EUCO 26/16. 
4   Commission Communication on Capital Markets Union - Accelerating Reform, COM(2016) 601 final, 

14.09.2016.  
Joint Declaration on the EU's legislative priorities for 2017.  

5  

3 

 
                                                 
consultation on the CMU Mid-term Review6 confirmed the more specific challenges that 
CMU has to address (see the box below for an overview of the consultation feedback). 

  European start-up and scale-up firms need more risk finance to invest in innovation 
and  growth.  There  is  a  need  to  develop  and  strengthen  new  forms  of  emerging  risk 
capital alongside bank credit. 

  The  size  of  EU  public  equity  and  debt  markets  lags  behind  other  developed 
economies, especially in some Member States. Accessing public markets is costly and 
complex, especially for small and mid-cap companies. 

  The  necessary  efforts  made  by  EU  banks  in  the  aftermath  of  the  financial  crisis  to 
reduce excessive exposures to risk and leverage have contributed to a contraction in 
new  loans  to  EU  businesses.  Capital  markets  can  offer  powerful  solutions  to  help 
banks  manage  their  balance  sheets  more  efficiently,  and  fund  their  lending  to 
businesses and households. 

  There  is  not  enough  investment  by  insurance  companies  and  pension  funds  in  risk 
capital,  equity  and  infrastructure.  More  private  capital  must  be  mobilised  to  fund 
sustainable  investment,  the  transition  to  a  low-carbon  economy  and  investment  to 
meet important social needs. 

  Engagement by retail investors with capital markets remains low. EU households are 
amongst the highest savers in the world, but the bulk of these savings are held in bank 
accounts with short maturities. More investment into capital market can help meet the 
challenges posed by population ageing and low interest rates. This, however, will not 
happen  unless  retail  investors  have  access  to  attractive  investment  propositions  on 
competitive and transparent terms. 

  Many long-standing and deep-rooted obstacles stand in the way of EU cross-border 
investment, undermining the efficiency of the EU economy. Barriers deter investors 
from diversifying their portfolios geographically, reduce market liquidity, and make it 
harder for companies to scale up. 

Over the past 18 months, in accordance with the original timetable, the Commission has 
delivered more than half the measures (20 out of 33) announced in the CMU Action 
Plan. 

A  particular  effort  has  been  made  to  increase  the  sources  of  risk  finance  as  firms 
gradually scale up, and make these more widely available across the EU.  

  Venture  capital  –  good  progress  has  been  made  in  implementing  the  Commission 
package. The European Parliament and Council agreement in principle of 30 May on 
the European Venture Capital Funds (EuVECA) Regulation and the European Social 
Entrepreneurship  Funds  (EuSEF)  Regulation  will  make  it  easier  for  investors  to 
invest in small and medium-sized innovative companies by opening up the regulation 
to fund managers of all sizes and by expanding the range of companies that can be 
invested in. The selection procedure for managers for one or more private sector-led 

6   Commission Staff Working Document (Feedback Statement for the public consultation on the Capital 

Markets Union Mid-term review) accompanying this Communication. 

4 

 
                                                 
pan-European  Venture  Capital  Funds-of-Funds  will  be  finalised  in  the  coming 
months. The Commission services have reviewed national tax incentives for venture 
capital and business angel. Building on this and on the initiatives envisaged under the 
2016  Start-up  and  Scale-up  Initiative,  a  study  setting  out  good  practices  is  being 
published  today.  It  will  support  Member  States'  policy  design  and  implementation, 
including  through  the  European  semester,  to  improve  the  effectiveness  of  such  tax 
incentives and foster the development of local capital markets. 

  Companies  entering  and  raising  capital  on  public  markets  –  progress  has  been 
made  in  making  this  easier.  The  December  2016  agreement  by  the  European 
Parliament and Council on a modernised EU Prospectus Regulation will be published 
in June 2017 and apply from mid-2019. As part of the improvements, the European 
Securities  and  Markets  Authority  (ESMA)  will  operate  a  new  EU-wide  online 
prospectus  database,  free  of  charge.  The  Commission  is  now  working  with  the 
European  Parliament,  the  Member  States,  and  ESMA  to  put  in  place  implementing 
measures, notably on the content and format of the alleviated EU Growth Prospectus, 
scrutiny and approval, the universal registration document and the information to be 
disclosed  for  secondary  issuances  (to  ensure  simplified  requirements  for  small  and 
frequent issuers). The Commission has also taken steps to address the bias in the tax 
system  in  favour  of  debt  over  equity,  as  part  of  its  October  2016  proposal  for  a 
Common  Consolidated  Corporate  Tax  Base  (CCCTB).  The  reviews  of  regulatory 
barriers  to  SME  listings  and  of  corporate  bond  market  liquidity  will  soon  be 
concluded. 

  Bank capacity to lend to the economy – progress has been made to free up capacity 
on  banks'  balance  sheets,  and  so  generate  additional  funding  for  the  economy.  The 
European  Parliament  and  Council  reached  an  agreement  in  principle  on  Simple, 
Transparent  and  Standardised  (STS)  securitisation,  alongside  a  review  of  capital 
requirements for banks on 30 May. In November 2016, the Commission proposed an 
amendment to the EU’s capital requirement rules for banks, empowering it to exempt 
the  entire  credit  union  sector  of  a  Member  State.  The  consultation  on  an  EU-wide 
framework for covered bonds and similar structures for small business loans has been 
completed. 

  Infrastructure  investment  –  the  Solvency  II  delegated  act  was  amended  in 
September 2015 and entered into application in April 2016, making it cheaper for EU 
insurance  companies  to  invest  in  qualifying  infrastructure  projects.  Today  the 
Commission  is  also  presenting  measures  to  review  risk  calibrations  for  investment 
into  infrastructure  corporates.  To  encourage  private  investment  by  banks  in 
infrastructure  projects, 
the  capital 
the  November  2016  proposal 
requirements  legislation  (CRR/CRD  IV)  would  create  a  more  risk-sensitive 
regulatory  environment  to  promote  high-quality  infrastructure  projects  and  reduce 
risks for investors. 

to  amend 

  Institutional  and  retail  investment  –  solid  groundwork  has  been  completed  to 
underpin  proposals  on  EU-wide  personal  pensions,  the  cross-border  distribution  of 
investment  funds  and  reduced  costs  for  insurance  companies  to  invest  in  private 
equity  and  privately-placed  corporate  debt.  In  parallel,  in  March  2017  the 
Commission presented its Consumer Financial Services Action Plan, which sets out 
ways  to  provide  consumers  with  greater  choice  and  better  access  to  retail  financial 
services  across  the  EU.  To  complement  efforts  on  the  Single  Euro  Payments  Area 
(SEPA),  the  action  plan  also  addresses  the  issue  of  high  costs  for  making  certain 

5 

 
payments  in  the  EU.  The  Commission  is  also  gearing  up  work  with  the  European 
Supervisory Authorities (ESAs) on increasing the transparency and comparability of 
costs and performance of retail investment and pension products. 

  Preventive  restructuring  and  second  chance  for  entrepreneurs  –  in  November 
2016,  the  Commission  proposed  rules  on  preventive  restructuring,  to  avoid  the 
liquidation  of  viable  companies  with  financial  difficulties  and  give  entrepreneurs  a 
chance to re-enter business life after bankruptcy. The proposal also lays down rules to 
enhance the efficiency of insolvency procedures, to make them more predictable, less 
costly and speedier.  These  proposals are currently being negotiated by the European 
Parliament and Council and their speedy adoption will make an important contribution 
to ensuring that the legal environment supports business activity.  

  The Commission's Report of March 2017 sets out a roadmap for removing national 
barriers  to  the  free  movement  of  capital.  The  Economic  and  Financial  Affairs 
Council endorsed this roadmap on 23 May 2017. 

  Financial stability – although more diverse funding channels under CMU will make 
the  EU  financial  system  more  resilient,  the  need  remains  to  be  able  to  identify  and 
react should stability  risks  materialise  in  capital  markets. Following its consultation 
in 2016, the Commission will now work to ensure that the European Systemic Risk 
Board (ESRB) has the capacity to monitor potential risks to financial stability arising 
from market-based finance. 

Of the outstanding measures where preparatory work was announced in the CMU Action 
Plan, the Commission will now quickly move forward with three legislative proposals, 
which are central to the creation of CMU: 

1.  A legislative proposal on a Pan-European Personal Pension Product (PEPP) by 
end  June  2017.  This  will  lay  the  foundations  for  a  safer,  more  cost-efficient  and 
transparent market in affordable and voluntary personal pension savings that can be 
managed on a pan-European scale. It will help meet the needs of people wishing to 
enhance  the  adequacy  of  their  retirement  savings,  address  the  demographical 
challenge,  complement  the  existing  pension  products  and  schemes,  and  support  the 
cost-efficiency  of  personal  pensions  by  offering  good  opportunities  for  long-term 
investment of personal pensions; 

2.  A legislative proposal specifying conflict of laws rules for third party effects of 
transactions  in  securities  and  claims  in  Q4  2017.  Differences  in  the  national 
treatment  of  third-party  effects  of  assignment  of  debt  claims  complicate  the  use  of 
these instruments as cross-border collateral and make it difficult for investors to price 
the  risk  of  debt  investments.  By  removing  the  uncertainty  about  the  applicable  law 
which  gives  rise  to  costs  and  risk,  this  proposal  will  promote  cross-border 
transactions. It will draw on the work of a specially mandated expert group and the 
results  of  the  on-going  public  consultation7.  The  proposal  will  provide  clarity  on 
which law applies to the third party effects in cases of transactions in securities and in 
claims;  

7   Public consultation on the conflict of laws rules for third party effects of transactions in securities and 

claim 

6 

 
                                                 
3.  A legislative proposal for an EU-framework for covered bonds in Q1 2018. This 
will  aim  to  create  a  more  integrated  covered  bond  market  in  the  EU,  without 
undermining  the  quality  of  existing  covered  bonds.  Covered  bond  markets  are  an 
real  economy; 
important  channel 

financing  of 

long-term 

the 

the 

for 

In  parallel,  the  Commission  will  explore  the  possibility  of  developing  European 
Secured Notes as an instrument for SME loans and infrastructure loans. 

In addition, the Commission is also advancing with its preparatory work on the following 
measures to implement the commitments in the original Action Plan: 

  Amendments to the Delegated Regulation supplementing Solvency II  in 2018 to 
review  the  prudential  treatment  of  private  equity  and  privately  placed  debt,  where 
prudentially justified, from a risk-based supervisory perspective; 

  Recommendation  on  private  placements  (building  on  the  experience  of  well-
functioning  national  regimes).8  Markets  for  private  placement  of  debt  can  broaden 
the  availability  of 
for  unlisted  medium-sized  companies.  The 
recommendation  will  be  informed  by  the  results  of  a  study,  to  be  published  in 
Q4 2017; 

finance 

  Communication  on  a  roadmap  for  removing  barriers  to  post-trade  market 
infrastructure (building on the recommendations of the EPTF – the European Post 
Trade  Forum)  –  in  Q4 2017.  Post-trade  market  infrastructure  plays  a  vital  role  in 
securities markets, ensuring the orderly transfer of ownership, payment and exercise 
of  rights  flowing  from  securities.9  On  average,  cross-border  trades  are  still 
substantially  more  expensive  than  domestic  trades.  An  efficient  post-trading 
environment can reduce such costs. On the basis of the EPTF report, the Commission 
services  will  soon  launch  a  public  consultation  to  collect  stakeholders'  views  on 
where they see the need for further improvements in the post-trade area, to achieve 
better integration; 

  Communication on corporate bond markets (building on the recommendations of 
the  Expert  Group  on  Corporate  Bond  Market  Liquidity)  –  in  Q4  2017.  Corporate 
bond  markets  are  an  important  funding  channel  for  larger  companies.  The 
Commission  is  reviewing  how  these  markets  function,  with  a  focus  on  how 
secondary market liquidity can be improved; 

  Code of Conduct to simplify withholding tax procedures, with a focus on refunds 
– by end 2017. The Commission is working  with  national tax experts  to share  best 
practice  and  agree  on  a  code.  This  will  be  a  practical  step  towards  more  efficient 
operational solutions for recovering withholding taxes. 

8   Such as Schuldscheine in Germany and the Euro-PP market in France. 
9   The implementation of the recently agreed Shareholder Rights Directive (SRD 2) will address some of 
the  barriers  related  to  exercising  rights  flowing  from  equity  and  data  transmission  via  the  chain  of 
intermediaries. 

7 

 
 
                                                 
3.  WHY THE EU NEEDS CMU MORE THAN EVER  

Recent  developments  in  the  EU’s  political  and  economic  context  call  for  strong  and 
competitive  capital  markets  to  finance  the  EU  economy,  alongside  the  Banking  Union. 
These  developments  make  this  Mid-term  Review  of  the  CMU  Action  Plan  even  more 
relevant and timely. 

In the light of increasing interconnectedness of financial markets, EU and globally, there 
is  a  need  to  further  integrate  EU  supervision  to  face  the  future  challenges  of  the  EU 
financial  markets.  The  Commission  remains  committed  to  integrated  financial  markets 
and  international  cooperation.  Equivalence  is  the  key  instrument  that  the  EU  uses  to 
effectively  manage  cross-border  activity  of  market  players  in  a  sound  and  secure 
prudential  environment,  while  ensuring  the  functioning  of  the  single  market.  This  calls 
for a strengthened supervisory framework for equivalence. 

Within the EU, the supervisory framework is a necessary element for well-functioning 
and integrated capital markets, building  on the objectives  stated in  the Five Presidents’ 
Report.10 Steps are underway to increase the ability of the ESAs to preserve EU orderly 
markets and financial stability. This includes the recent consultation on the operations of 
the  ESAs.  Within  the  EU-27,  in  particular  ESMA’s  ability  to  ensure  consistent 
supervision  across  the  EU  should  be  strengthened.  This  should  ensure  that  the  single 
rulebook is implemented in a uniform way across the Single Market. Therefore, financial 
entities with similar business size and risk profiles should be subject to the same standard 
of  supervision  regardless  of  where  they  are  located  in  the  EU  and  to  avoid  regulatory 
arbitrage.  The  Reflection  Paper  on  the  Deepening  of  the  EMU  stressed  that  a  more 
integrated supervisory framework ensuring common implementation of the rules for the 
financial  sector  and  more  centralised  supervisory  enforcement  is  key  for  building  a 
CMU. 

The departure of the United Kingdom from the Single Market reinforces the urgent need 
to further strengthen and integrate the EU capital market framework, including on central 
counterparties (CCPs), investment firms and markets for initial public offerings (IPOs). It 
also strengthens the need for further integration of supervision at EU level.  

Financial technology (FinTech) is transforming capital markets by bringing new market 
players  and  more  efficient  solutions,  increasing  competition,  and  lowering  costs  for 
businesses and investors. Examples of financial innovations that can make the EU capital 
markets  broader  and  deeper  include:  crowdfunding  and  other  alternative  funding  tools; 
supply  chain  finance11;  robo-advice;  online  shareholder  voting;  and  the  possible 
application  of  block  chain  technology  in  post-trading.  FinTech  can  offer  solutions  in 
several  capital  market  segments  and  functions,  such  as:  equity  issuance;  corporate 
governance;  asset  management;  investment  intermediation;  product  distribution;  and 
post-trade market infrastructure including securities custody services. 
More  recent  legislation  such  as  the  Payment  Services  Directive  (PSD  2)12  has  been 
designed to respond to rapid technological changes in the payments industry and thus to 
ensure  a  balanced  approach  which  allow  FinTech  companies  to  develop  new  business 

10   https://ec.europa.eu/commission/publications/five-presidents-report-completing-europes-economic-

and-monetary-union_en 

11   The identification of best practice on supply chain finance would provide support for the development 

of this relevant financing source for SMEs. 

12   Directive  (EU)  2015/2366  of  25 November  2015 on  payment  services,  L  337/35, 23.12.2015,  p. 35-

127. 

8 

 
                                                 
models.  The  ongoing  public  consultation  on  FinTech  will  help  the  Commission  to 
identify new issues that may need to be integrated into the CMU policy framework. 

A  deep  re-engineering  of  the  financial  system  is  necessary  for  investments  to  become 
more sustainable and for the system to promote truly sustainable development from an 
economic, social and environmental perspective. This implies finding ways to integrate 
sustainability  into  the  EU’s  regulatory  and  financial  policy  framework  and  to  mobilise 
and  orient  more  private  capital  flows  towards  sustainable  investments.  The  17 
Sustainable  Development  Goals  (SDGs)  identified  in  the  UN  2030 Agenda  for 
Sustainable  Development13  provide  a  framework  for  directing  such  investments,  which 
the EU is fully committed to implementing.14   

Among other long-term sustainability challenges, managing climate change depends on 
making  finance  flows  consistent  with  the  long-term  decarbonisation  objectives  and 
climate-resilient development. The Paris agreement, which marked a watershed in global 
commitment to tackling climate change, put finance at the heart of this policy.  

The UN 2030 Agenda also highlights the key role that finance must play in meeting the 
SDGs.  Policy  makers  and  the  financial  industry  are  starting  to  propose  solutions  that 
incentivise  investors  to  shift  support  to  sustainable  and  long-term  projects  and  suitable 
companies.  

Recognising the importance of these challenges, the Commission has established a High-
Level Expert Group to advise it on how to integrate sustainability considerations into EU 
financial regulation and financial markets practices. 

Similarly,  capital  markets  can  also help  private  capital  to  be  channelled  into  rewarding 
investment  opportunities  with  positive  social  externalities,  thereby  helping  the  EU  to 
meet its social responsibilities.  

Institutional  investors  have  traditionally  been  long-term  equity  investors  in  capital 
markets.  However,  over  the  past  15  years  EU  insurance  companies  have  reduced  their 
equity investments to around 5-10 % of their current total portfolio. Equity investments 
by  pension  funds  have  remained  more  significant,  but  they  invest  either  predominantly 
on their home market or, if abroad, outside of the euro area. There is a need to assess the 
economic  drivers  of  equity  investments  by  insurance  companies  and  pension  funds, 
including investments within the EU and the potential impact of regulatory constraints at 
EU and national level and other factors. 

Finally, there is a need to broaden the geographical reach of capital markets so that all 
Member States can reap the benefits of deeper and more integrated capital markets. CMU 
can help develop those market segments and funding channels that require proximity and 
local  solutions  for  businesses  and  investors.  At  the  same  time,  CMU  will  lead  to  more 
integrated  capital  markets,  and  thus  enable  companies  and  investors  to  access  deeper 
capital pools elsewhere in the EU. 

4.  NEW PRIORITY INITIATIVES TO STRENGTHEN THE CMU ACTION PLAN 

These  evolving  challenges  call  for  a  reframing  of  the  CMU  Action  Plan  so  that  it 
provides  strong  answers.  This  Mid-term  Review  is  built  around  a  set  of  new  priority 

13   UN Resolution A/RES/70/1. 
14   Communication  from  the  Commission  ‘Next  steps  for  a  sustainable  European  future’  (COM(2016) 

739 final)  

9 

 
                                                 
measures which keep the focus on: simplifying cross-border investment and developing 
capital  market  ecosystems  throughout  the  EU;  and  addressing  some  additional 
dimensions of the developing EU capital market systems.  

The measures identified here, along with the outstanding CMU work-streams, constitute 
the basis for a decisive and lasting contribution to laying the foundations for a true CMU 
by 2019. The new initiatives presented in this Communication will be integrated into the 
Commission’s 2018 work programme. All measures will be prepared in accordance with 
the  Better  Regulation  principles,  notably  through  assessing  the  impact,  minimising 
compliance costs and ensuring proportionality when developing legislative proposals. 

The  consolidated  set  of  measures  aiming  to  put  the  CMU  building  blocks  in  place  by 
2019 is presented in the Annex. More detailed information on the Commission services’ 
work to implement the CMU commitments is included in the Staff Working Document 
which  accompanies  this  Communication.15  Strong  progress  in  implementing  this 
programme will lend irreversible momentum to the objective of creating CMU. 

4.1.  Strengthen the effectiveness of supervision to accelerate market integration  

Supervision will be at the heart of efforts to build CMU given the central role that it plays 
in accelerating market integration and creating single market opportunities for financial 
entities and investors.  

More  effective  and  consistent  supervision  is  essential  to  eliminate  possibilities  for 
regulatory  arbitrage  between  Member  States  in  the  way  that  they  supervise  financial 
entities and activities.  

Consistent  and  effective  supervision  ensures  well-functioning  capital  markets  by 
eliminating  barriers  to  cross-border  investment,  and  contributes  to  simplifying  the 
business  environment  and  reducing  compliance  costs  which  result  from  divergent 
implementation  for  firms  operating  on  a  cross-border  basis.  More  effective  supervision 
creates  additional  single  market  opportunities  to  financial  entities  and  investors,  and 
enables  companies  to  access  funding  in  a  wider  market.  Consistent  and  effective 
supervision  also  contributes  to  enhancing  investor  protection,  building  confidence  in 
capital markets, and to preserving financial stability. 

ESMA, the European Insurance and Occupational Pensions Authority (EIOPA) and the 
European Banking Authority (EBA) have a key role in fostering supervisory convergence 
and therefore in driving market integration.  

The recent ESA consultation16 showed that the rules under which the ESAs operate need 
to  evolve  to  increase  the  effectiveness  of  supervision.  Stakeholder  feedback  to  the 
consultation  pointed  to  the  need  to  adjust  the  regulatory  framework  under  which  the 
ESAs operate to improve their ability to supervise the financial sector and thus to better 
deliver on their objectives. 

ESMA in particular plays a key role in fostering capital market integration. To ensure an 
EU-wide approach to supervision and a consistent application of the single rulebook for 
capital  markets,  there  is  a  need  to  strengthen  ESMA's  ability  to  identify  and  tackle 

15   Commission Staff Working Document (Economic Analysis) accompanying this Communication. 
16   Public consultation on the operations of the European Supervisory Authorities.  

10 

 
                                                 
weaknesses  in  national  supervision,  and  to  identify  areas  where  ESMA's  direct 
supervision may be warranted. 

The  challenges  arising  in  relation  to  CCPs  are  particularly  noteworthy.  The  growing 
systemic importance of CCPs for the EU financial system  – due to their size and inter-
connectedness – has underlined the shortcomings of the current arrangements for EU and 
third-country  CCPs.  The  Commission  announced  its  intention  to  present  a  legislative 
proposal  in  June  strengthening  the  framework  for  both  EU  and  third  country  CCPs  to 
ensure  financial  stability,  the  safety  and  soundness  of  CCPs  and  to  support  the  further 
development of CMU. 

ESMA’s  supervisory  tools  should  be  optimised  to  ensure  that  deficiencies  identified  in 
national supervisory outcomes and practices are dealt with in a consistent and coherent 
manner, while respecting the principle of subsidiarity. 

Priority action 1 

The Commission will propose in Q3 2017 amendments to the functioning of ESMA 
and the other ESAs to promote the effectiveness of consistent supervision across the 
EU and beyond. In targeted areas, the Commission will strengthen ESMA's powers 
including,  where  warranted,  granting  direct  supervision  to  support  a  functioning 
CMU.  

4.2.  Enhance  the  proportionality  of  rules  to  support  initial  public  offerings  and 

investment firms 

More needs to be done to ensure that European companies and investors can reap the full 
benefits of access to public markets. In particular, public listings of SMEs remain low in 
the  EU.  The  amount  of  equity  raised  on  SME-dedicated  markets  decreased  by  EUR  9 
billion compared to pre-crisis levels.  

Particular challenges are faced by small and medium-size companies seeking to raise less 
than EUR 100 million through public issuance. The current regulatory environment may 
discourage  these  firms  from  raising  capital  on  public  markets.  The  CMU  Action  Plan 
stressed  the  need  to  ensure  that  the  SME  Growth  Markets17  strike  the  right  balance 
between providing sufficient investor protection and avoiding unnecessary administrative 
burden.  

The Commission has worked with representatives of public markets ecosystems to assess 
how the public markets for SMEs are functioning, and to identify potential solutions to 
barriers to SME listing.18 The Commission services will publish soon a report on barriers 
to  SME  listing  as  the  starting  point  for  a  coherent  programme  of  work  in  this  area 
including on Priority action 2. 

17   MIFID  II  (Directive  2014/65/EU  of  15 May  2014  on  markets  in  financial  instruments,  OJ  L  173, 
12.6.2014, p. 349) provides for a new category of markets, called SME Growth Markets, to facilitate 
access to capital for SMEs. An SME Growth Market is a Multilateral Trading Facility, where at least 
50 %  of  the  issuers  whose  financial  instruments  are  traded  on  are  SMEs.  SMEs  are  defined  as 
companies that have an average market capitalisation of less than EUR 200 million. 

18   Two workshops were held in October and December 2016 on: fostering admission of SME shares to 
trading; solutions to regulatory issues and market failures; and barriers to SME Growth Markets. 

11 

 
                                                 
Building  on  significant  input  from  stakeholders,  the  Commission  will  review  the 
regulatory barriers to SME admission on regulated markets and SME Growth Markets as 
foreseen by the Call for Evidence.19 This targeted review of key sectoral legislation (e.g. 
MiFID  II  and  MAR20)  will  aim  at  exploring  to  what  extent  those  legislative  provisions 
take account of the constraints on SMEs and "Growth Markets".21 

Priority action 2 

The  Commission  will  explore  through  an  impact  assessment  whether  targeted 
amendments  to  relevant  EU  legislation    could  deliver  a  more  proportionate 
regulatory environment to support SME listing on public markets, which could lead 
to targeted changes in sectoral legislation in Q2 2018.  

Investment firms provide a range of services which give investors access to securities and 
derivatives  markets  through  investment  advice,  portfolio  management,  brokerage, 
execution of orders, proprietary trading, underwriting etc. The EU framework governing 
their  authorisation  and  conduct  is  set  out  in  MiFID.  In  addition,  they  are  subject  to 
prudential  rules  under  CRR/CRD.22  A  more  effective  prudential  and  supervisory 
framework calibrated to the size and nature of investment firms should restore the level 
playing field, boost competition and improve investors' access to new opportunities and 
better ways of managing their risks. It should therefore ensure that any relocation is not 
driven by regulatory arbitrage or differences in the supervisory framework. 

Priority action 3 

The  Commission  will  present  a  legislative  proposal  to  review  the  prudential 
treatment of investment firms in Q4 2017. 

4.3.  Harnessing the potential of FinTech 

The Commission is assessing how FinTech can contribute to deepening and broadening 
EU capital markets by integrating the potential of digitisation to change business models 
through  data-driven  solutions  in  asset  management,  investment  intermediation  and 
product distribution. 

Innovative businesses, regardless of whether they are start-ups or already established on 
the  market,  raise  concerns  that  national  supervisory  practices  may  limit  their  ability  to 
innovate and to offer services cross-border. In particular, innovative firms argue that they 
are  subject  to  disproportionate  or  inconsistent  practices  in  the  application  of  regulatory 
requirements.  

19   Respondents to the public consultation and the call for evidence noted that some technical aspects of 
the rules could be modified to alleviate the administrative burden on small issuers, without modifying 
the  core  principles  of  the  regulation.  This  may  include  technical  aspects  related  to  insider  lists  and 
management transactions reporting obligations. 

20   Regulation (EU) No 596/2014 of 16 April 2014 on market abuse, OJ L 173, 12.6.2014, p. 1.  
21   This review may concern sectoral legislation already in application or soon to be in application. Until 

this review is concluded, the existing sectoral legislation will continue to apply. 

22   Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to the 
activity of credit institutions and the prudential supervision of credit institutions and investment firms 
(OJ L 176, 27.6.2013, page 338); Regulation (EU) No 575/2013 of the European Parliament and of the 
Council of 26 June 2013 on prudential requirements for credit institutions and investment firms (OJ L 
176, 27.6.2013, page 1). 

12 

 
                                                 
Recently, regulators and supervisors in some Member States have developed methods to 
support  the  development  of  innovative  businesses  by  working  with  them  to  understand 
their specific  issues.  These initiatives  —  called ‘regulatory sandboxes’  — include hubs 
that  provide  guidance  on  applicable  regulation  and  direct  supervisory  assistance  while 
these firms are testing their activities.  

Furthermore,  efforts  have  been  made  to  acknowledge  the  existence  of  and  introduce  a 
balanced  approach  for  FinTech  companies  in  recent  legislation,  such  as  the  Payment 
Services Directive (PSD 2).23 

The ongoing public consultation on FinTech launched on 23 March 2017 will provide the 
Commission with valuable input on: 

  whether  new,  more  proportionate  licensing  arrangements  for  FinTech  activities  and 
firms in areas such as investment-based and lending-based crowdfunding are needed;  

  how  to  support  FinTech  firms,  registered  in  one  EU  country,  doing  cross-border 
business without requiring further authorisation in each EU country ('passporting'). 

Priority action 4 

As part of a comprehensive approach to enable FinTech, the Commission will assess 
the  case  for  an  EU  licensing  and  passporting  framework  for  FinTech  activities  in 
Q4 2017. 

4.4.  Using capital markets to strengthen bank lending and stability 

Capital  markets  can  also  help  European  banks  to  overcome  the  challenges  of  non-
performing loans (NPLs) which are weighing heavily on some national banking systems. 
NPLs have a significant adverse impact on banks’ profitability and their ability to lend, 
including to SMEs.  

Policies  that  aim  to  improve  the  functioning  of  secondary  markets  for  NPLs  are  a  key 
part  of  any  durable  solution.  This  solution  could  include  steps  to  promote  more 
predictability and transparency that allow potential secondary market purchasers of NPLs 
to more accurately price those assets.  

It would allow banks to sell their NPLs to a larger pool of investors potentially leading to 
transaction prices that better reflect the underlying value of the assets. This will lead to 
cleaned-up  balance  sheets  and  credit  institutions  better  prepared  to  provide  new  credit 
flow to the economy.  

The  Commission  services  will  shortly  launch  a  public  consultation  on  potential  EU 
action  in  areas  such  as  loan  servicing  by  third  parties  (i.e.  parties  other  than  the 
originating lender) and the transfer of loans, including to non-bank entities. 

The management of NPLs would also benefit from more efficient and more predictable 
loan enforcement and insolvency frameworks designed to enable swift value recovery by 
secured creditors. The ongoing benchmarking exercise will be completed in Q4 2017. It 
will  shed  light  on  the  features  of  enforcement/insolvency  systems  which  contribute  to 
better/worse outcomes.  

23   Directive  (EU)  2015/2366  of  25 November  2015 on  payment  services,  L  337/35, 23.12.2015,  p. 35-

127. 

13 

 
                                                 
The  benchmarking  work  is  also  underscoring  the  challenges  facing  banks  and  other 
secured  creditors  posed  by  the  lack  of  efficiency  in  the legal  frameworks  for  enforcing 
collateral  in  order  to  recover  value  from  non-performing  loans.  There  is  scope  for 
strengthening secured creditors’ ability to recover value from secured collateral on loans 
to  corporates  and  entrepreneurs,  drawing  on  the  experience  of  some  Member  States  in 
ways that do not require tampering with national insolvency and pre-insolvency systems 
and  which  is  consistent  with  the  objectives  of  the  restructuring  and  second  chance 
proposal. 

Priority action 5 

As  part  of  its  efforts  to  address  the  NPL  issue,  the  Commission  will  present 
measures to support secondary markets for non-performing loans. The Commission 
will  also  launch  an  impact  assessment  with  a  view  to  considering  a  possible 
legislative  initiative   to strengthen the  ability of  secured creditors to recover  value 
from  secured  loans  to  corporates  and  entrepreneurs  (Q1  2018),  while  remaining 
consistent with and complementary to the Commission proposal of November 2016 
on the effective functioning of the pre-insolvency/restructuring  systems and doing 
its utmost to support the co-legislators in finding an agreement on that proposal as a 
priority. 

4.5.  Strengthen the EU's leadership on sustainable investment 

Both the UN 2030 Agenda for Sustainable Development24 and the Paris agreement make 
it  clear  that  reform  of  the  financial  system  is  central  to  putting  our  economies  on  a 
sustainable  growth  path.  Reorienting  private  capital  flows  to  more  sustainable 
investments requires a comprehensive and deep rethinking of our financial framework.  

Long-term investment decisions should integrate wider risks and returns including those 
linked to environmental or other social externalities. 

Addressing risks related to climate and the environment is also key for a stable financial 
system.  To  this  end  the  Commission  established  a  High-Level  Expert  Group  on 
Sustainable Finance to develop a European policy programme. The group will publish its 
recommendations  for  an  overarching  and  comprehensive  EU  strategy  on  sustainable 
finance by December 2017. 

Financial markets are increasingly adept at differentiating between sustainable and other 
investments. Green bonds are in the vanguard. Social impact funds and origination and 
packaging  of  energy  efficiency  mortgages  are  further  examples.  The  positive 
development  of  these  markets  should  be  supported  through  EU-level  measures  to 
improve  confidence  in  projects’  implementation,  disclosures  and  labels,  and  provide 
appropriate  regulatory  recognition  of  any  observed  improvement  of  risk-return 
performance of these assets. 

The  Commission  will  soon  publish  non-binding  guidelines  that  will  provide  to 
companies  a  principle-based  methodology  to  help  them  comply  with  existing  EU  non-
financial  reporting  requirements.  These  guidelines  build  on  sectoral  or  thematic 
frameworks  such  as  the  forthcoming  FSB  Task  Force  on  Climate-related  Financial 
Disclosures  (TCFD)  recommendations  that  could  be  useful  for  disclosing  non-financial 
information.  

24   UN Resolution A/RES/70/1. 

14 

 
                                                 
In the context of the consultation for the Mid-term review of CMU, the Commission was 
urged to reflect on steps that could be launched now to begin the recalibration of the EU 
financial policy framework. Examples of issues that were identified include: 

  clarification  that  fiduciary  duties  of  asset  owners  and  asset  managers  includes 
integrating  Environmental,  Social  and  Governance  (ESG)  considerations  into 
decision-making; 

  ensuring that sustainability is more central to corporate governance; 

  promoting  better  integration  of  ESG  performance  in  issuer  ratings  and  key  market 

benchmarks. 

The  review  of  the  European  Fund  for  Strategic  Investments  (EFSI)  framework  is  also 
putting  greater  focus  on  meeting  the  EU’s  social  and  environmental  objectives.  Private 
capital, EFSI funding and other EU funds should be combined in an efficient manner to 
shift  investments  towards  those  positive  social  and  environmental  externalities,  thereby 
also contributing towards meeting the objectives of the recent European Pillar of Social 
Rights25. 

Priority action 6 

The Commission will decide by Q1 2018 at the latest on the concrete follow-up that 
it will give to the recommendations of the High Level Expert Group on Sustainable 
Finance.  In  particular,  it  shall  already  set  in  motion  work  to  prepare  measures  to 
improve disclosure and better integrate sustainability/ESG in rating methodologies 
and  supervisory  processes,  as  well  as  in  the  investment  mandates  of  institutional 
investors  and  asset  managers.  It  will  also  develop  an  approach  for  taking 
sustainability  considerations  into  account  in  upcoming  legislative  reviews  of 
financial legislation. 

4.6.  Cross-border investment 

Investment  funds  in  the  EU  are  still  small  and  less  cost-efficient  than  in  some  other 
jurisdictions,  while  the  distribution  of  funds  remains  geographically  limited.  The 
evidence collected during the public consultation shows that a significant reason for this 
is  the  lack  of  regulatory  and  supervisory  convergence,  including  divergent  national 
requirements  on  the  use  of  the  marketing  passport  under  the  UCITS  and  AIFM 
Directives.  Greater  cross-border  distribution  and  in  particular  digital  cross-border 
distribution would allow funds to grow, allocate capital more efficiently across the EU, 
and compete within national markets to deliver better value and greater innovation.  

Barriers  to  the  cross-border  distribution  of  investment  funds  were  also  mapped  by  the 
Commission  and  an  expert  group  of  Member  States’  representatives.  The  result  was  a 
roadmap of measures endorsed by Member States in May 2017 to tackle the first set of 
barriers identified and to identify and dismantle other potential barriers in CMU-relevant 
areas.  

In  addition  to  investment  funds,  the  roadmap  contains  measures  in  other  areas  such  as 
withholding tax procedures. 

25    Commission Communication Establishing a European Pillar of Social Rights, COM/2017/0250 final, 

26.04.2017. 

15 

 
                                                 
Priority action 7 

The  Commission  will  launch  an  impact  assessment  with  a  view  to  considering  a 
possible 
legislative  proposal  to  facilitate  the  cross-border  distribution  and 
supervision of UCITS and AIFs in Q1 2018. 

A stable investment environment is crucial for encouraging more investment within the 
EU. Greater clarity on existing substantive EU standards is particularly important for EU 
investors, national administrations, stakeholders as well as for national court judges. This 
should ensure greater transparency on the effective protection of EU investor rights in the 
single market. 

Bilateral  investment  treaties  between  Member  States  set  varying  standards  of  treatment 
outside  the  EU  legal  framework  for  cross-border  investment  within  the  single  market. 
They  are  incompatible  with  EU  law.  The  Commission  is  pursuing  infringement 
proceedings  in  respect  of  intra-EU  bilateral  investment  treaties  (BITs).  In  addition,  the 
Commission  is  also  assessing  options  to  establish  a  framework  for  the  amicable 
resolution of investment disputes.  

Priority action 8 

In Q1 2018, the Commission will adopt an interpretative Communication to provide 
guidance on existing EU rules for the treatment of cross-border EU investments.  

It will also immediately launch an impact assessment with a view to  setting out an 
adequate framework for the amicable resolution of investment disputes. 

4.7.  Support the development of local capital market ecosystems 

For  market-based  finance  to  be  a  viable  and  sustainable  alternative  to  bank  lending, 
CMU  needs  to  build  the  financial  circuits,  market  conventions  and  technical  and  legal 
infrastructure.  These  will  allow  market  participants  to  operate  at  local,  regional  or 
national level and also carry out transactions confidently on a pan-European scale.  

The maturity of capital markets differs considerably among countries. There is a need to 
broaden  the  geographical  reach  of  capital  markets  so  that  all  Member  States  reap  the 
benefits of deeper and more integrated capital markets. The biggest challenges here are 
faced by the Member States from Central, Eastern and South-Eastern Europe (CESEE). 

To  support  the  development  of  local  markets  and  help  strengthen  capital  market  eco-
systems through technical assistance, the Commission is actively working with a growing 
number of Member States.26  

Discussions  held  by  the  Commission  with  the  Vienna  Initiative,  which  supports 
investment in the CESEE region and beyond, led to a CMU Working Group being set up 
in  March  2017.  The  Working  Group  will  issue  by  the  end  of  2017  a  report  which  will 
identify the most important areas of work and propose solutions for further development 
of capital markets.  

26   In  partnership  with  the  European  Investment  Bank,  the  fi-compass  provided  support  as  regards 
financial  instruments  funded  by  European  Structural  and  Investment  Funds  in  26  Member  States, 
including in the CESEE region. 

16 

 
                                                 
The  Commission  will  continue  to  strongly  support  efforts  to  broaden  the  geographical 
reach of capital markets through proximity and local solutions for SME funding. A key 
workstream to achieve these objectives is the provision of technical support to Member 
States  through  the  Structural  Reform  Support  Programme.  The  programme  will 
contribute  to  institutional,  administrative  and  growth-enhancing  structural  reforms  in 
Member  States  by  providing  support  to  national  authorities.  Under  the  programme,  the 
Commission has so far received over fifty requests for technical support in the financial 
sector from thirteen Member States, with a high focus on support for the development of 
capital markets.27  

Priority action 9 

By  Q2 2018,  the  Commission  will  propose  a  comprehensive  EU  strategy  on  steps 
that  can  be  taken  at  EU  level  to  support  local  and  regional  capital  market 
development across the EU. This will build on the report of the Vienna Initiative's 
CMU  Working  Group  and  will  take  account  of  experience  through  the  growing 
delivery  of  on-demand  technical  support  under  the  Commission's  Structural 
Reform Support Programme. 

5.  CONCLUSION: DRIVING REFORM WITH A LASTING IMPACT 

CMU  seeks  to  create  the  enabling  conditions  so  that  new  forms  of  funding  can  be 
developed  and  strengthened  for  businesses,  in  particular  small  firms,  and  for  long-term 
and  infrastructure  investment.  It  aims  to  use  financial  innovations  to  bridge  the 
information  gap  between  investors  and  businesses  and  provide  more  cost-effective 
investment opportunities to retail investors. CMU also seeks to mobilise private capital to 
fund  sustainable  investment  by  identifying  ways  to  create  financial  regulation  that 
accelerates the shift of private capital from environmentally and socially unsustainable to 
sustainable projects. 

CMU  seeks  to  overcome  the  EU  economy’s  reliance  on  bank  lending  by  providing  a 
more  diversified  system  in  which  non-bank  finance  efficiently  complements  the 
traditional banking channels.  

This  would  increase  the  amounts  available  to  finance  the  EU  economy.  Because  CMU 
involves  a  broad  rebalancing  of  the  EU  financial  system,  such  a  profound  structural 
change needs time to take shape and cement itself.  

Regulatory reform is only one part of the change that is needed. Time is needed to build 
the  financial  circuits,  market  conventions  and  technical  and  legal  infrastructures  that 
allow market participants to transact more efficiently. 

The Commission has consistently delivered on its commitments in the September 2015 
the  CMU  Action  Plan,  in  accordance  with  the  original  timetable.  Its  goal  has  been  to 
drive  change  and  so  create  more  developed  and  efficient  capital  market  finance.  It  has 
notably  presented  proposals  to  develop  venture  capital  markets;  make  it  easier  and 
cheaper  for  companies  to  access  public  markets  by  revising  the  rules  on  prospectuses; 
remove  the  preferential  tax  treatment  of  debt  over  equity;  promote  a  safe  and  liquid 

27   These requests have covered areas such as facilitating market access, enabling growth phase company 
development,  alternative  financing  for  mature  firms  (securitisation  etc.)  and  capital  market 
supervision. 

17 

 
                                                 
market for securitisation; and give honest entrepreneurs the opportunity to restructure or 
a  second  chance  in  case  of  bankruptcy.  The  Commission  has  also adopted  measures  to 
support infrastructure investment by insurance companies and banks. 

Following up on comprehensive preparatory work announced in the original Action Plan, 
the  Commission  will  soon  make  proposals  for  a  simple,  efficient  and  competitive  EU 
personal  pension  product,  for  removing  cross-border  obstacles  to  the  ownership  of 
securities and for covered bonds. 

Amongst the new priorities of the Mid-term review of CMU, the Commission will aim to 
strengthen the supervisory framework for capital markets, to enhance the proportionality 
of rules for small listed companies and for investment firms, to remove further barriers to 
cross-border investment, to strengthen the EU's leadership on sustainable finance, and to 
enable FinTech.  

The Mid-term review sets out a comprehensive reform agenda so that the building blocks 
of the CMU are in place by 2019. This will anchor the enabling conditions for reforming 
the EU financial system, which involves rebalancing the mix between bank and non-bank 
finance.  

These  steps  will  also  ensure  that  EU  capital  markets  can  respond  to  new  challenges, 
which include the United Kingdom leaving the Single Market. 

CMU's  success  will  depend  on  the  level  of  political  commitment  from  the  European 
Parliament and the Member States and how market participants make use of the building 
blocks. The industry must play its part in restoring the trust of their clients and building 
confidence in capital markets across the EU. 

The Commission will report regularly to the European Parliament and the Council on its 
progress. These reports should serve as the basis for strengthened dialogue between the 
institutions to ensure that significant progress is made on the proposed priority measures 
under the current legislature. 

18 

 
Annex — Full overview of the CMU building blocks to be in place by 2019 

This  Annex  provides  an  overview  of  the  measures  that  aim  to  put  in  place  the  CMU 
building  blocks  by  2019.  It  includes  the  priority  measures  from  the  Mid-term  review, 
follow-up to existing commitments and a number of new measures.  

More  detailed  information  on  all  these  measures  is  provided  in  the  Commission  Staff 
Working  Document  (Economic  Analysis)  that  accompanies  this  Communication.  The 
tables  below  also  indicate  –  where  already  determined  –  whether  a  measure  takes  the 
form  of  a  legislative  proposal  (L),  level  2  measure  (L2),  non-legislative  measure 
(NL), or a Commission Communication (C). 

STRENGTHENING THE CAPACITY OF EU CAPITAL MARKETS 

Supervision  

Develop local 
and regional 
capital 
markets  

Propose amendments to the functioning of ESMA 
and the other ESAs to promote the effectiveness 
of consistent supervision across the EU and 
beyond (priority action 1)  

Priority action 
(L) 

Q3 2017 

Comprehensive EU strategy on local and regional 
capital market developments across the EU 
(priority action 9) 

Priority action 
(NL) 

Q2 2018 

FINANCING FOR INNOVATION, START-UPS AND NON-LISTED COMPANIES 

Assess the case for EU licensing and passporting 
framework for FinTech activities (priority action 
4)  

Priority action 

Q4 2017 

Report on best practice in supply chain finance 

New action (NL)  Q4 2018 

Good practice on tax incentive schemes for venture 
capital and business angel investments 

Follow-up action  
(NL) 

2017-18 

Recommendation to promote best practice  

Information 
barriers for 
SME finance 

Selection of the proposals following the Call for 
proposals to fund capacity building projects under 
the Horizon 2020 programme.  

Follow-up action  
(NL) 

Q4 2017 

Follow-up action  
(NL) 

Q4 2017  

Innovative 
corporate 
finance 
platforms 

Business 
angels and 
venture 
finance 

Private 
placements 

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

Prospectuses 
for public 
offerings 

Implementing measures  

Follow-up action 
(L2) 

2018-
2019 

Corporate 
bond markets 

Communication (roadmap) to propose possible 
follow-up  

Follow-up action 
(C) 

Q4 2017 

SME listing 
package  

Explore through an impact assessment whether 
targeted amendments to relevant EU legislation 
can deliver a more proportionate regulatory 

Priority action  

Q2 2018 

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

environment to support SME listing on public 
markets (priority action 2)  

Assessment of the impact of MiFID II level 2 rules 
on listed SME equity research  

New action (NL)  Q1 2019 

Monitor progress on IASB commitment to improve 
disclosure, usability and accessibility of IFRS  

 Follow-up action 
(NL) 

Ongoing 

Develop best practices on the use by Member States 
of EU funds to partially finance costs borne by SMEs 
when seeking admission of their shares on the future 
SME Growth Markets.  

 New action (NL)  Q2 2018 

Proportionate 
prudential 
requirements 

Legislative proposal to improve the 
proportionality of prudential rules for investment 
firms (priority action 3) 

Priority action 
(L) 

Q4 2017 

INVESTING FOR LONG TERM, INFRASTRUCTURE AND SUSTAINABLE INVESTMENT 

Assessment  of  the  drivers  of  equity  investments  by 
insurance companies and pension funds  

New action (NL)  Q4 2018 

Long-term 
investment 

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

Follow-up action 
(L2) 

Q3 2018 

Report  on  whether  the  accounting  treatment  of 
equity 
is  sufficiently 
IFRS  9 
conducive to long term financing.  

instruments 

in 

New action (NL)  Q2 2018 

Infrastructure 
investments 

Measures  to  review  the  calibration  of  risk  charges 
for infrastructure corporates 

Follow-up action 
(L2) 

Q2 2017 

Sustainable 
investment 

on 

to 
Decide 
recommendations  by  the  High  Level  Expert 
Group on Sustainable Finance (priority action 6) 

follow-up 

concrete 

the 

Priority action  

Q1 2018 

FOSTERING RETAIL INVESTMENT 

Personal 
pensions 

Legislative proposal on a pan-European personal 
pension product 

Follow-up action 
(L) 

Q2 2017 

Retail 
investment 
product 
markets 

Retail investor 
engagement 

Follow-up to study on distribution systems of retail 
investment  products  across  the  EU.  Recurrent 
reporting  by  the  ESAs  of  cost  and  performance  of 
retail 
the  principal  categories  of 
investment  and  pension  products.  Feasibility  study 
on  the  development  of  a  centralised  hub  for 
mandatory  disclosure  requirements  and  related 
services. 

long-term 

Based on Member States experience with 
Investment Savings Account and an existing study 
on employee share ownership schemes, develop 
best practices 

Follow-up action 
(NL) 

Q2 2018 

New action (NL)  Q1 2019 

20 

 
 
 
 
STRENGTHEN BANKING CAPACITY TO SUPPORT THE WIDER ECONOMY 

Market 
funding for 
banks 

Secondary 
markets for 
NPLs 

Amendments to Commission Delegated Regulation 
to  introduce  a  specific  prudential  treatment  STS 
securitisation in Solvency II 

Follow-up action 
(L2) 

Ongoing 

Legislative  proposal  for  an  EU  framework  on 
covered bonds 

Follow-up action 
(L) 

Q1 2018 

Assess  the  case  for  European  Secured  Notes  for 
SME loans and infrastructure loans 

Follow-up action  Q2 2018 

Present measures to develop a secondary market 
for NPLs (priority action 5) 

Priority action 
(NL and L) 

Q4 2017 

Launch  an  impact  assessment  with  a  view  to 
considering  a  possible  legislative  initiative  to 
strengthen  the  ability  of  secured  creditors  to 
recover  value  from  secured  loans  to  corporates 
and entrepreneurs (priority action 5)  

that  banks 
Benchmarking  study  on  outcomes 
experience  under  national 
loan  enforcement 
(including  insolvency)  systems  when  managing 
defaulting loans. 

Priority action  

Q1 2018 

Follow-up action 
(NL) 

Q4 2017 

FACILITATE CROSS-BORDER INVESTMENT 

Investment 
funds 

Impact  assessment  with  a  view  to  considering  a 
possible  legislative  proposal  to  facilitate  cross-
border distribution of UCITS and AIFs (priority 
action 7) 

Priority action  

Q1 2018 

Post-trade 
market 
infrastructure 

Taxation 

Communication  (roadmap)  to  address  remaining 
Giovannini barriers and other barriers 

Follow-up action 
(C) 

Q4 2017 

Legislative  proposal  specifying  conflict  of  laws 
rules  for  third  party  effects  of  transactions  in 
securities and claims 

Follow-up action 
(L) 

Q4 2017 

Best practice and code of conduct simplification of 
withholding tax procedures with a focus on refunds. 

Follow-up action 
(NL) 

Q4 2017 

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

Follow-up action 
(NL) 

Q4 2017  

Corporate 
governance 

Facilitate  the  cross-border  exercise  of  shareholder 
rights including voting in the implementation of the 
Shareholders  Rights  2  Directive  published  on  20 
May 2017. 

New action (L2) 

Q3 2018 

National 
barriers to the 
free movement 
of capital 

Monitor  the  implementation  of  the  Roadmap  on 
removing  national  barriers  to  free  movement  of 
capital  and  continue  discussing  with  the  Expert 
Group. 

Follow-up action 
(NL) 

Ongoing 

Interpretative  Communication 
to  provide 
guidance  on  the  existing  EU  standards  for  the 
investments 
treatment  of  cross-border  EU 
(priority action 8) 

Stability of the 
regulatory 
framework 

Impact  assessment  with  the  view  to  setting  out 
the  amicable 
an  adequate 
21 

framework 

for 

Priority action 
(C) 

Q1 2018 

Priority action  

Q3 2017 

 
 
resolution of investment disputes (priority action 
8) 

Enhance 
capacity to 
preserve 
financial 
stability 

Ensure  that  the  ESRB  has  the  capacity  to  monitor 
potential  risks  to  financial  stability  arising  from 
market-based finance. 

Follow-up action 
(L) 

Q3 2017 

22