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: Mairead McGuinness
Language: EN

I want to begin by thanking our rapporteurs and shadow rapporteurs for their efforts, and to look first at the prospective regulation. It’s been said already by the previous two speakers that the COVID-19 pandemic has hit EU firms harder, and over a longer time period, than we had initially anticipated, especially small and medium—sized companies. Many of our companies find themselves in a very difficult situation and really do need new investment to keep afloat. The proposed EU Recovery Prospectus is one way to enable EU companies to raise new equity capital on public markets quickly and without excessive bureaucracy. This short prospectus will be easy to produce for companies, easy to understand for investors and easy to scrutinise for national regulators. That means that it will help companies to raise capital more easily, helping them to stay solvent, recapitalise their business and strengthen their resilience in the recovery. Thanks to your efforts, we’ve achieved a format for the new Recovery Prospectus that eases the administrative burden on companies while giving investors enough information to allow them to make an informed decision. Now turning to the reform of the Markets in Financial Instruments Directive II (MiFID II). Let me explain why this reform is just as important in my view.  The new rules on small cap research will enhance the visibility of small and medium—sized companies for investors, so it will help these companies to raise capital on public markets. On the derivatives reform, the amendments are essentially about green energy, and how to make it easier to finance a new generation of renewable energy projects. Providers of renewable energy rely on a secure income stream and this is what the derivatives markets for energy achieve. To be effective, derivatives markets need to be liquid. If we maintain the current low position limit at 25% per market participant, the nascent energy exchanges will never take off. In smaller Member States, exchanges have only two or three active market participants.  There is also a clear link between these amendments on the derivatives market and the pandemic. During this COVID-19 crisis, energy prices have been volatile because of a more erratic pattern of energy demand. It is essential to protect income for renewable energy suppliers, particularly when demand is so volatile. As highlighted in a recent communication on fostering the openness, strength and resilience of the EU’s economic and financial system, we need to support the development of euro—denominated derivative markets, so that the EU will be globally competitive. Finally, during the COVID-19 crisis, more people are using online financial services; fewer are visiting local bank branches. This switch from paper—based information to electronic format will benefit retail clients, who will receive the relevant information faster. This will also enable investment firms to use their resources more efficiently, and this will also align our financial legislation with the objectives of the Green Deal and Digital Agenda.  Other changes will only apply to business—to—business relationships and will not have any impact on retail investors. While I believe that the MiFID II amendment represents a real improvement, I want to acknowledge this evening the concerns expressed by some of you on these amendments. Some of you have mentioned that there was not a proper impact assessment accompanying this proposal. Last year, when the crisis hit, we wanted to respond in a timely way, but we did so with a very solid look at the pros and cons of the proposed way forward. The main costs and benefits resulting from the amendments, including on the derivatives markets, are analysed in a separate staff working document. Some of you also suggested that the reform would undermine the rules protecting investors, and that more clarity was needed on product governance rules and the real costs linked to investment products.  One objective of the Capital Markets Union Action Plan is to make the EU an even safer place for individuals to save and invest for the long-term and their retirement. In this context, we are working on a retail investment strategy.  We will set out a coherent and consistent approach to all investor protection issues related to MiFID II and other horizontal legislation, and I look forward to working closely with all of you on these issues. To conclude, I would like to stress that the Capital Markets Recovery Package includes targeted measures to speed up the recovery from the COVID-19 pandemic and help the financial ecosystem to recover as soon as possible. We have done this in a timely and efficient manner given the significance of the crisis. Voting in favour of the Recovery Prospectus and the modifications to the MiFID II rules will give a positive signal that the EU institutions can act quickly and decisively in times of need.