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Economic and monetary challenges - Review of EU regulations to support the financing of the EU economy and financial stability
Market Infrastructures as key players towards Capital Markets Union
By Hachmeister Alexandra - Chief Regulatory Officer and Member of the Group Management Committee, Deutsche Börse AG
The EU Commission’s initiative of a Capital Markets Union (CMU) is an ambitious work programme to foster growth, jobs and innovation. Cross-border frictions still impede companies’ access to financing from across the EU. Further integration of European financial markets is required to encourage non-bank funding and to diversify sources of funding.
Promoting equity and debt financing
Easier access to equity financing, e.g. through venture capital or IPOs, could be one way to help businesses grow. Market infrastructure providers could play a key role in increasing efficiency and transparency at the pre-IPO stage by bringing issuers and investors together. Particularly in Europe, the process is complicated by a wide variance in market practices and regulatory structures that govern the financial markets of the 28 Member States. The CMU could be a major breakthrough in this area.
In addition to equity funding, debt financing will continue to represent an attractive option both for investors and corporates and should therefore also be promoted under the CMU. Issuance of corporate bonds directly to investors is a good method of debt funding which could be better utilised in Europe, given that bond markets can often provide financing when banks are unwilling to lend and companies do not have to give up shareholder rights.
Call for Evidence
As an integrated provider of financial services regarding trading, clearing and settlement of financial instruments, Deutsche Börse Group (DBG) is affected by a multitude of legislative acts and is reliant on a predictable regulatory environment.
DBG supports regulatory efforts to improve the orderly functioning of markets. Financial legislation should favour transparent markets, risk-managed trading, clearing and settlement and orderly operations – guided by the principles of a reduction of regulatory arbitrage between jurisdictions, the avoidance of double regulation, clear and coherent terminology as well as consistent rules across all dossiers.
As a global financial market infrastructure Deutsche Börse Group is a natural partner in developing the CMU
The “Call for Evidence” initiative starts with “regulatory reconciliation”, analysing whether there are any unintended consequences, given the large amount of legislation put in place recently, and understanding the interactions and their combined impact. It should not be seen as “de-regulation”, but rather “re-regulation”. Misdirected regulation raises costs for businesses, utilising valuable funds that could instead be turned towards innovation and growth creation. Regulatory initiatives should be aligned with and not contradict the goals of the CMU initiative – as the introduction of an FTT in only ten countries would do.
DBG supports any measures to make legislation more coherent and to improve uniformity, simplicity and applicability of European financial law – for competent authorities, for market participants and consumers of financial services. The overall aim should be to establish a more attractive environment for companies and investors.
A core function of an exchange organisation such as DBG is to bring investors and issuers together. This ultimately helps the flow of capital, including for SMEs that make up the backbone of Europe’s economy. DBG’s experience in managing the entire value chain of a capital market convinces us that broadening access to this type of funding is not just beneficial to Europe’s economy, but in fact crucial.