EUROPEAN
COMMISSION

Brussels, 14.9.2016
COM(2016) 601 final

COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN
PARLIAMENT, THE COUNCIL, THE EUROPEAN CENTRAL BANK, THE
EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE
OF THE REGIONS
Capital Markets Union - Accelerating Reform

EN

EN

Introduction
The Capital Markets Union (CMU), part of the third pillar of the Commission’s
Investment Plan for Europe, is essential to delivering the Juncker Commission's
priority to boost jobs, including youth employment, and growth. It seeks to better connect
savings to investment and to strengthen the European financial system by enhancing private
risk-sharing, providing alternative sources of financing and increasing options for retail and
institutional investors. Removing obstacles to the free flow of capital across borders will
strengthen Economic and Monetary Union by supporting economic convergence and helping
to cushion economic shocks in the euro area and beyond, making the European economy
more resilient. This is even more important in the current economic environment.
The CMU Action Plan of September 20151 set out a comprehensive programme of
actions to put in place the building blocks for the CMU by 2019 and was strongly
supported by the European Parliament, Council and stakeholders. Alongside the Single
Market Strategy and Digital Single Market Strategy, it sits at the heart of the European reform
agenda for a deeper and fairer Single Market2. In the current political and economic context
developing stronger capital markets in the EU is even more important.
It is therefore essential to step up implementation and accelerate reform. The European
Council of 28 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 One year after the launch of the CMU Action Plan, it is
important to rapidly finalise the first wave of CMU initiatives so they can have an effect on
the ground as soon as possible. It is also important to progress quickly towards the adoption
of forthcoming legislative proposals. Finally, economic and technological developments, such
as the rapid growth of FinTech or the need to build more sustainable finance, have the power
to transform EU capital markets. Taking account of the changing political context, the
Commission is taking forward the further priority areas needed to complete the CMU and will
undertake a mid-term review in 2017.
1) Finalising the first CMU measures
Completion of the first measures is essential for the CMU to have a tangible impact on
the ground. The European Council of 28 June 2016 called for an agreement by the end of
2016 on the proposals for Simple, Transparent and Standardised (STS) securitisations4, to free
up capacity on banks' balance sheets and provide investment opportunities for long-term
investors, and on the proposal for the simplification of prospectus rules making it easier for
companies to seek investment from the capital markets.
Rapid implementation of the securitisation package has the potential to quickly generate
additional funding in the real economy. Establishing more risk sensitive capital charges for
STS securitisations, will help to build confidence in the market and free up the balance sheets
1
2

3
4

Action Plan on Building a Capital Markets Union, COM(2015)468 final, 30.9.2015
Communication of 1 June 2016 on "Delivering the Single Market Agenda for Jobs, Growth and
Investment", COM(2016)361
European Council Conclusions, EUCO 26/16, 28 June 2016
Proposal for a for a Regulation laying down common rules on securitisation and creating a European
framework for simple, transparent and standardised securitisation, COM(2015)472 final, 30.9.2015;
Proposal for a Regulation amending Regulation (EU) No 575/2013 on prudential requirements for credit
institutions and investment firms, COM(2015)473 final, 30.09.2015

2

of banks to provide additional financing. If EU securitisations could be revived – safely – to
pre-crisis average levels, this could provide additional funding to the economy of more than
EUR 100 billion, while at the same time enhancing financial stability. The Council has
already reached a General Approach and progress should now be made urgently in the
European Parliament.
The modernisation of the Prospectus rules5 will increase access to capital markets, in
particular for smaller companies. The Prospectus is the gateway to EU capital markets. It
needs to be simple to produce, clear for investors and approved quickly. The new Prospectus
rules should help generate more and less costly financing opportunities for companies. They
need to be implemented as rapidly as possible. The Commission will do its utmost to support
the co-legislators in finding an agreement before the end of the year.
Measures to strengthen venture capital markets will make it easier for medium-sized
innovative companies to get financing. As part of the third pillar of the Investment Plan for
Europe, the Commission proposed revised European Venture Capital Fund and European
Social Entrepreneurship Fund Regulations. The proposals will boost investment into venture
capital and social projects and make it easier for investors to invest in small and mediumsized 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. To make the cross border
marketing of funds cheaper and easier, the proposals explicitly prohibit fees levied by
Member States. To continue building confidence in the EU venture capital market, the
Commission calls on the European Parliament and the Council to finalise this proposal by the
end of 2016. In addition the Commission will promote the establishment of one or more
Venture Capital Fund-of-Funds to support innovative investments in Europe and continue to
work on other measures to support venture capital.
CMU is a project for all Member States. Capital markets are at different stages of
development across Member States and smaller companies need access to finance through
efficient and accessible local channels. To support the development of national and regional
capital markets the Commission has developed capacity to provide technical assistance to
Member States upon request. To launch the first projects in early 2017, the co-legislators need
to rapidly conclude the negotiations on the Commission's proposal for a Regulation on the
establishment of a Structural Reform Support Programme (SRSP) for the period 2017-2020.6
2) Accelerating delivery of the next phase of CMU actions
Inefficiencies and differences in national insolvency frameworks generate legal
uncertainty, obstacles to recovery of value by creditors, and barriers to the efficient
restructuring of viable companies in the EU, including for cross-border groups. The
Commission will present shortly a proposal on business restructuring and second chance, key
elements of an appropriate insolvency framework. Allowing honest entrepreneurs to benefit
from a second chance after overcoming bankruptcy is crucial for ensuring a dynamic business
environment and promoting innovation. The Commission is also conducting a benchmarking
review of loan enforcement (including insolvency) regimes to establish a detailed and reliable
picture of the outcomes that banks experience when faced with defaulting loans in terms of
5

6

Proposal for a Regulation on the prospectus to be published when securities are offered to the public or
admitted to trading, COM(2015)583 final, 30.11.2015
Proposal for a Regulation on the establishment of the Structural Reform Support Programme for the period
2017 to 2020, COM(2015)701 final, 26.11.2015

3

delays, costs and value-recovery. The review will assist Member States seeking to increase
the efficiency and transparency of their regimes.
Taxation regimes can present barriers to the development of cross border capital
markets. The Commission is taking action to encourage Member States to address
withholding tax refund procedures and encourage best tax practices in promoting venture
capital and business angel investment into start-ups and innovative companies. Increasing
equity financing, which is relatively underdeveloped in Europe, requires changes to taxation
frameworks. Addressing the preferential tax treatment of debt over equity would encourage
more equity investments and create a stronger equity base in companies. It would also provide
benefits in terms of financial stability, as companies with a stronger capital base would be less
vulnerable to shocks. The Commission intends to issue a proposal on the debt-equity bias in
November, in the context of its proposal on the CCTB7, and calls on the Council to adopt that
measure as rapidly as possible.
The EFSI 2.0-proposal will significantly reinforce the Investment Plan for Europe.
Europe requires large amounts of additional long-term sustainable investment to
support jobs, growth, competitiveness and a low-carbon economy. Public support
through the Reinforced Investment Plan for Europe will help with its focus on market
failures and suboptimal investment situations, but further measures are needed to
unlock private investment for the longer term. To further facilitate investments in
infrastructure assets by institutional investors, the Commission will adopt an amendment to
the Solvency II Delegated Act to reduce the capital charges attached to investments by
insurance companies in infrastructure corporates. In parallel, the Commission will as part of
the review of the Capital Requirement Regulation and Directive before the end of the year,
propose to expand the favourable capital treatment for loans to SMEs and to reduce the capital
requirements attached to investments in infrastructure.
3) Next steps: developing further priorities
The Commission will consider proposals for a simple, efficient and competitive EU
personal pension product.8 Personal pensions have an important role to play in linking longterm savers with long-term investment opportunities. Personal pensions can help address the
demographic challenges of aging populations, evolving working patterns among the
workforce, and help in securing adequate replacement rates in the future as a complement to
state-based or occupational pensions. As a result of fewer barriers to the provision of pension
services across borders, an EU personal pension product would increase competition between
pension providers, enable services to be sold into bigger markets and create economies of
scale that should benefit savers. The Commission will base its approach on the results of the
ongoing public consultation when deciding on the best way forward to support these markets9.
Options under consideration include a possible legislative proposal which could be tabled in
2017.

7

8

9

The proposal for the Common Corporate Tax Base will foster convergence in the definition of national tax
bases. This will be accompanied by a separate proposal (CCCTB) to establish a common approach to the
"consolidation" of corporate tax owed by firms operating across two or more Member States.
Personal pension products are individual retirement related savings products which are complementary to,
but separate from, state or occupational pension schemes. Efforts to develop these markets will complement
pension provision through state or occupational pension schemes.
Consultation on Capital Markets Union: Action on a potential EU personal pension framework, 27.7.2016

4

The CMU aims to put European savings to better use, improving the efficiency through
which savers and borrowers are matched, and increasing the performance of the EU
economy. Retail investor engagement is a critical challenge for the development of a stronger
capital market in the EU. This requires greater confidence among retail investors, and
transparency to help investors to make the right investment decisions. The Commission will
present an action plan on retail financial services to strengthen retail investor participation in
capital markets and open up the European market for retail financial services to deliver better
results for consumers and companies.
Reforms for sustainable finance are necessary to support investment in clean
technologies and their deployment, ensure that the financial system can finance growth
in a sustainable manner over the long term, and contribute to the creation of a lowcarbon, climate resilient economy. Such reforms are essential to meet our climate and
environment objectives and international commitments including the delivery of the EU's
commitments under the Paris Agreement on climate change10 and the objectives of the 2015
Circular Economy package11. The Commission is working in the context of the G20 to further
these objectives12. The Commission supports alignment of private investments with climate,
resource-efficiency and other environmental objectives, both through policy measures and
public investment. In this regard, work is ongoing to increase the availability of green funds
through the European Fund for Strategic Investment, by earmarking at least 20% of the EU
2014-2020 budget available for climate action, and by setting up a platform for financing the
circular economy. The need to support EU green bond standards was highlighted in the CMU
Action Plan. The Commission will establish an expert group to develop a comprehensive
European strategy on green finance in the coming months. More broadly, in respect of
environmental, social and governance issues (ESG), the EU has adopted mandatory disclosure
requirements for certain large companies and will also adopt non-binding guidelines on the
methodology for reporting such information to investors and consumers. It is also assessing
the follow-up to the recent consultation on long-term and sustainable investment which
emphasised the importance of ESG issues for the longer-term performance of companies and
investors.
Technology is driving rapid change in the financial sector and has the power to increase
the role of capital markets, and bring them closer to companies and investors. It also
benefits consumers by offering a wider choice of services which are more convenient to
use or more easily accessible. This innovative potential should be harnessed. FinTech
firms succeed by providing new services that meet consumers' needs better in many financial
fields including payments and lending. Technology is a driver of competition and helps to
create a more diverse financial landscape. At the same time, the rapid development of
FinTech poses new challenges in managing risks and ensuring consumers have adequate
information and safeguards. In a number of Member States, regulatory authorities are
developing new approaches to support the development of FinTech firms, including hubs
providing regulatory guidance or teams focusing on policy implications of FinTech. The
10

11

12

Along with EU commitments under the 2030 Agenda for Sustainable Development, the EU 2020 and 2030
climate and energy targets
Communication on Closing the loop - An EU action plan for the Circular Economy, COM(2015)614 final,
2.12.2015
The G20 Summit Communiqué from the Hangzhou summit (04/05 September) welcomes the G20 Climate
Finance Study Group report on "Promoting Efficient and Transparent Provision and Mobilization of
Climate Finance to Enhance Ambition of Mitigation and Adaptation Actions".

5

Commission will continue to promote the development of the FinTech sector and work to
ensure the regulatory environment strikes an appropriate balance between building confidence
in companies and investors, protecting consumers and providing the FinTech industry the
space to develop. The Commission will work with the European Supervisory Authorities
(ESAs), the European Central Bank, other standard setting bodies, and the Member States to
develop a co-ordinated policy approach that supports the development of FinTech in an
appropriate regulatory environment.
Covered bond markets are among the largest private debt markets in Europe and an
important channel for longer term financing. They are instrumental for credit institutions
to efficiently channel finance to the real estate market and for publicly guaranteed instruments
including some SME loans. Based on the results of the recent public consultation and ongoing
study, the Commission will set out as part of the CMU mid-term review which legislative
changes may be needed to support the development of covered bond markets throughout the
EU.
The EU has a successful track record in promoting the cross-border distribution of
investment funds, and will work to remove remaining barriers to a fully integrated
market – reducing costs for providers and delivering benefits to retail investors. The
Commission published a detailed public consultation13 seeking evidence of where eliminating
unjustified barriers would support increased cross-border marketing of funds, competition,
choice, and reduce costs for investors. The Commission will take action to remove remaining
barriers in the asset management sector, through legislative changes if necessary.
The Commission will accelerate its work to remove barriers in the post-trading
environment. Efficient and safe post-trade infrastructures are key elements of wellfunctioning capital markets. An expert group has been established to assess the evolution of
the EU post-trade landscape following recent legislative changes, market developments and
the emergence of new technologies. The group will also assess the extent to which the
Giovannini barriers14 have been removed and identify any new or emerging barriers. In 2017,
the Commission will launch a public consultation based on the results of the group's work to
determine the most appropriate way forward in this area. In parallel, the Commission will
propose a future legislative initiative to determine with legal certainty which national law
shall apply to security ownership and to third party effects of the assignment of claims.
Effective and consistent supervision is essential to ensure investor protection, promote
the integration of capital markets and safeguard financial stability. The role of the
European Supervisory Authorities (ESAs) is fundamental in building a deeper and more
integrated single market. The European Securities and Markets Authority (ESMA) has
already increased the focus of its work on supervisory convergence to ensure consistency in
the application of capital markets rules and the oversight of market participants.15 However,
further work will be needed to reinforce the European dimension of supervision in areas
where it can bring benefits. For example, work is ongoing in the area of governance and
financing of the ESAs, and the Commission will publish a white paper on these issues. In
13

14

15

Consultation on CMU action on cross-border distribution of funds (UCITS, AIF, ELTIF, EuVECA and
EuSEF) across the EU, 2.6.2016
The First Report of the Giovannini Group (2001): "Cross-border clearing and settlement arrangements in
the European Union" identified 15 barriers that were preventing efficient cross-border clearing and
settlement of securities in the EU.
ESMA Supervisory Convergence Work Programme 2016, ESMA/2016/203, 11.02.2016

6

addition, a public consultation was launched in August 2016 as part of the review of the EU
macro-prudential framework.16 Based on the results of the consultation, the Commission will
adopt a legislative proposal in this area in 2017.
The Five Presidents' Report highlighted the need to strengthen the supervisory framework in
order to ensure the solidity of all financial actors, which should lead ultimately to a single
European capital markets supervisor. The Commission will consider, in close consultation
with the European Parliament and the Council, the further steps in relation to the supervisory
framework that are necessary to reap the full potential of CMU.
The success of CMU can only be ensured if Member States are determined to work to
dismantle the unjustified national barriers to the free movement of capital. National
provisions often go beyond EU law and can in some instances be damaging for cross-border
investment. A Member States' expert group has made progress in mapping barriers and
exchanging good practices. Building on this work, the Commission will adopt a report by the
end of 2016 that will list the barriers identified by the group, identify best practices, and set
out a roadmap of proposed actions that the Member States would be encouraged to take by
2019 at the latest. An important part of this work focuses on best practice and a code of
conduct for more efficient withholding taxes procedures. This is a long-standing barrier to
cross-border investment. Increasing the efficiency of these procedures at the national level
and agreeing on a Code of Conduct in 2017 will require a strong commitment from Member
States.
Better regulation, the reduction of administrative burden for market participants and
the simplification of existing legislation will help the CMU deliver its potential. All CMU
proposals announced are prepared in line with the better regulation principles, consultation
and impact assessment. As part of its better regulation agenda the Commission is pursuing an
ambitious program to identify and remove unnecessary regulatory constraints. The
Commission's Call for Evidence has identified key areas within financial services legislation
where improvements can be implemented. These refer to the need to address impediments to
the flow of finance to the economy, to enhance the proportionality in the regulatory
framework to better balance financial stability and growth objectives, to reduce unnecessary
regulatory burdens and address the remaining risks in the financial system. The Commission
will present its follow-up to the Call for Evidence in the coming months.
Conclusion
The CMU Action Plan set out the key changes that are needed to strengthen EU capital
markets. This plan is more important than ever and the implementation of actions in the
plan should be accelerated. It is crucial that all relevant actors work together to achieve this.
It is equally important to ensure that the CMU priorities evolve alongside the evolving
political, economic and technological landscape. The Commission will continue to monitor
developments and identify further actions that are necessary to develop the CMU. The
Commission calls on the European Parliament and the Member States to do everything
within their power to deliver the CMU Action Plan as soon as possible and support jobs
and growth in Europe.

16

Consultation on the review of the EU macro-prudential policy framework, 1.8.2016

7

ANNEX: STATE OF PLAY OF INITIATIVES IN THE CMU ACTION PLAN
This overview provides an update on the status of actions contained in the CMU Action Plan
and follows an earlier update published on 25 April 2016.17
Financing for innovation, start-ups and non-listed companies
Action

Support venture
capital and
equity financing

Progress and next steps
Pan-European venture capital fundof-funds

Publish call for expression of interest in 2016.

Revise EuVECA and EuSEF
legislation

Legislative proposal presented by Commission in
July 2016, under negotiation in the European
Parliament and Council.

Tax incentives for venture capital and
business angels

Overcome
information
barriers to SME
investment

Promote
innovative
forms of
corporate
financing

Study on national tax incentives underway.
Workshop with Member State experts in October
2016.

Strengthen feedback given by banks
declining SME credit applications

Close discussions with European banking industry
and representatives of small businesses.

Map existing local or national support
and advisory capacities across the EU
to promote best practices.

Workshop on Advisory Support for SME Access to
Finance: September 2016.

Investigate how to develop or support
pan-European information systems

This policy action will build on results of mapping of
national support and advisory systems.

Report on crowdfunding

Report published in May 2016.

Develop a coordinated approach to
loan origination by funds and assess
the case for a future EU framework

ESMA opinion received in April 2016.

Making it easier for companies to enter and raise capital on public markets
Action

Progress and next steps
Proposal to modernise the Prospectus
Directive

European Parliament plenary debate in September
2016.
Council General Approach reached in June 2016

Strengthen
access to public
markets

Support equity
financing

17

Review regulatory barriers to SME
admission on public markets and
SME Growth Markets

Workshops with stakeholders in October and
December 2016.

Review EU corporate bond markets,
focusing on market liquidity

Study launched in July 2016.
Expert group to be launched in autumn 2016.

Address debt-equity bias in national
corporate tax systems

Proposals on CCTB to be presented by COM by end
2016.

Commission Staff Working Document "Capital Markets Union: First Status Report", SWD(2016)147 final,
25.4.2016, available at http://ec.europa.eu/finance/capital-markets-union/docs/cmu-first-statusreport_en.pdf

8

Investing for long term, infrastructure and sustainable investment
Action

Support
infrastructure
investment

Ensure
consistency of
EU financial
services rulebook

Progress and next steps
Adjust Solvency II calibrations for
insurers' investment in infrastructure
including infrastructure corporates
and European Long Term
Investment Funds
calibrations,
appropriate
(ongoing)
Review of theif CRR,
changes
on

Amendments to Solvency II legislation regarding
infrastructure projects and ELTIFs took effect in
April 2016.
Assessment of infrastructure corporates ongoing.

infrastructure calibrations

Under consideration in context of forthcoming
revision of CRR/CRD.

Call for evidence on the cumulative
impact of the financial reform

Public hearing held in May 2016; feedback statement
published in May.
Follow-up to be announced in Q3 2016.

Fostering retail and institutional investment
Action

Progress and next steps

Increase choice
and competition
for retail
consumers

Green Paper on retail financial
services and insurance

Action Plan to follow.

Help retail
investors to get a
better deal

EU retail investment product markets
assessment

Study on the "Distribution systems of retail
investment products across the European Union" to
be launched by end of 2016

Support saving
for retirement

Assessment of the case for a policy
framework to establish European
personal pensions

Public consultation launched in July 2016; closes on
31 October 2016.
Call for tender for a study launched in June 2016
EIOPA advice delivered in July 2016

Expand
opportunities for
institutional
investors and
fund managers

Assessment of the prudential
treatment of private equity and
privately placed debt in Solvency II

Preparatory work ongoing.

Consultation on the main barriers to
the cross-border distribution of
investment funds.

Public consultation launched on 2 June 2016; closes
on 2 October.

Leveraging banking capacity to support the wider economy
Action

Progress and next steps

Strengthen local
financing
networks

Expand possibility for Member States
to authorise credit unions outside the
CRD/CRR.

Explore the possibility to amend CRR as part of the
CRD/CRR review

Build EU
securitisation
markets

Proposal on simple, transparent and
standardised (STS) securitisations
and revision of the capital
calibrations for banks.

General Approach in Council; under scrutiny by the
European Parliament. Vote in ECON Committee
expected in November 2016.

Support bank
financing of the
wider economy

Consultation on an EU-wide
framework for covered bonds and
similar structures for SME loans.

Consultation concluded, study launched.

9

Facilitating cross-border investing
Action
Remove national
barriers to crossborder
investment
Improve market
infrastructure
for cross-border
investing
Foster
convergence of
insolvency
proceedings

Remove crossborder tax
barriers

Progress and next steps
Meetings of Expert group of Member States'
representatives ongoing

Report on national barriers to the
free movement of capital

Communication to be adopted by end 2016.

Targeted action on securities
ownership rules and third-party
effects of assignment of claims

Call for tender for a study launched in August 2016.

Review progress in removing
remaining Giovannini barriers

Expert group to conclude work in early 2017,
followed by Commission consultation.
Legislative proposal on business restructuring and
second chance to be presented in autumn 2016;

Insolvency law

Benchmarking of loan enforcement (including
insolvency) regimes.

Best practice and code of conduct for
relief-at-source from withholding
taxes procedures

Financial
stability

Results of T2S Harmonisation Steering Group of the
(ECB)
Agree next steps in Communication on capital
barriers.

Study on discriminatory tax obstacles
to cross-border investment by pension
funds and life insurers.

Strengthen
supervisory
convergence and
capital market
capacity building

Best practices exchanged in expert group on barriers
to the free movement of capital

Terms of reference under preparation.

Strategy on supervisory convergence
to improve the functioning of the
single market for capital

Implementation of ESMA's first annual Supervisory
Convergence Work Programme ongoing.

White Paper on ESAs' funding and
governance.

Preparatory work ongoing in view of adoption of a
White Paper.

Technical assistance to Member
States to support capital markets'
capacity.

The European Parliament and the Council to adopt
the SRSP Regulation.

Review of the EU macro-prudential
framework.

Public consultation launched on 1 August 2016;
results to be used as basis for legislative proposal.

Ongoing discussions on the preparation of the 2017
Supervisory Convergence Work Programme.

Work with Member States to identify priority areas
for technical assistance ongoing.

10