Debate: Markets in financial instruments – EU Recovery prospectus and targeted adjustments for financial intermediaries to help the recovery from the COVID- pandemic
Date: WEDNESDAY, 10 FEBRUARY 2021
Speaker: Ondřej Kovařík
Country: Finland
Language: EN

The pandemic is extremely challenging both for investors and companies. They need financial injections through investments, they need access to finance but, above all, they need simple and straightforward procedures with minimal red tape, without, of course, compromising investors’ protection. The Capital Markets Recovery Package is integral to the economic recovery of the EU following the COVID-19 pandemic. By introducing targeted changes to some capital market rules, it encourages greater investments in the economy and helps ensure quick re-capitalisation of companies. It will also increase the capacity of banks to finance that recovery.  The two pieces of this package we are voting on this week will ensure that Europe is in the best place possible to help our markets, financial institutions and businesses recover from this crisis, and here I would like to join the call of the previous rapporteur and invite all of you to support this package. I am proud of the outcome of our negotiations on the Prospectus Regulation, and here I would like to thank both the Council and the Commission for their cooperation for a very quick and productive negotiation process. The prospectus might be a little bit cryptic thing for non-economists but in short it’s a document providing all necessary information about a company you are about to invest in. Removing temporarily extra costs and administration for companies allows them to access the finance that they need more quickly. And the Recovery Prospectus does just that. The adjustments that we have made will help companies to raise capital through shares instead of going deeper into debt. They will facilitate fundraising by banks, which will have a vital role to play in the recovery of the real economy. Specifically, we have introduced a new, lightweight, Recovery Prospectus. This will be a temporary prospectus that can be used by those companies who have already listed on the markets. The Recovery Prospectus will be available for secondary issuances, to issuers of shares, until the end of 2022, and will be limited to 30 pages in length, compared to the current market average of 400 pages. As you can imagine, this will significantly cut costs by hundreds of thousands of euros for those wishing to raise capital, and this is around half of the current cost of producing a secondary issuance prospectus. While the businesses will have fewer costs and less red tape to deal with, we have ensured that investor protection has remained at the forefront of the negotiations. For example, issuers will have to disclose what their level of capital is compared to their indebtedness, as well as a working capital statement. They will also have to publicly outline what will be done with the money invested in their company.  If investors are to invest in a company in these turbulent times, it is only right that they also know how much the current situation with the pandemic has affected the company they are considering investing in. Therefore, in the Recovery Prospectus, issuers will have to lay out clearly how COVID-19 has affected their businesses.  Overall, I am convinced that we have struck the right balance between a streamlined prospectus and ensuring investor protection, while transparency is maintained at the highest level.  Commissioner, colleagues, businesses in Europe have suffered enormously due to the current situation. Significant uncertainty remains, not least for the service sector. The temporary changes we introduced in the Prospectus Regulation will provide financial security to businesses across Europe. The Capital Markets Recovery Package will give breathing space to the financial sector. This will also allow financial institutions to provide for businesses to keep them afloat. Let’s continue to reflect on the simplification of legislation also for the future in the post-pandemic context. A good balance between regulation, safeguards and the freedom to innovate should guide us in our review of capital markets legislation.  I am sure you will agree that we must do all we can to help businesses, especially SMEs, to weather the storm and come through the pandemic with the ability to grow again. They could then become powerhouses that will support Europe as we embark on the digital and green transitions.  The Recovery Package as a whole is only a short-term solution. During the next few years, we must work to ensure a resilient and future-proof framework for our financial markets. In Europe, there is a lot of potential for the Capital Markets Union. We only need willingness to break down the barriers that have hindered cross-border access to finance until now.  I firmly believe that bold and ambitious reforms to our financial framework will allow us to compete on every level with other jurisdictions around the globe.