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Financing of the EU economy - Is the CMU on the right track?

Savers need to become investors in order for CMU to succeed

By Jochumsen Hans-Ole - President, Nasdaq


Nasdaq fully supports the EU’s vision for a capital markets union with the aim of releasing investments and creating an internal capital market. However, in order to achieve the set goals, a number of shortcomings in the proposed CMU Action Plan must be addressed.

The action plan focuses more on improvements for major institutions than on the capital markets function in itself. This is unfortunate. Financial stability and sustainable growth in Europe are a top priority.

The focus in the action plan should be on increased openness, so that the capital markets become more accessible to smaller companies, on stimulating long-term private investments in listed shares and the promotion of new technology. Such measures create growth and jobs.

Simply put; We must turn savers into investors!

Nasdaq recently published a whitepaper on the CMU. As a key player in the European and global financial markets, Nasdaq welcomes the opportunity to contribute its expertise and experience.

We are seeing a wave of innovative companies being driven by the opportunities afforded by new technology. Despite this, Europe’s companies, including small and medium-sized growth companies, are having difficulty taking advantage of these new opportunities as they are overly dependent on bank financing and lack sufficient access to venture capital.

Through Nasdaq and other exchanges, savers are given the opportunity to channel funds into innovation and job creation. IPOs make it possible for companies to shift from private to public financing and allow venture capital to reuse funds to finance new companies. As well as access to financing, the visibility of the company is increased, which makes recruitment easier and, in the end, improves profit.

A lack of harmonization of regulations within the EU and with other countries, along with unintended consequences of regulations, are problematic. Some rules have indeed been designed with the aim of improving the capital market. Yet others prevent or discourage institutional investors investing in shares, which chokes growth companies’ access to financing.

Nasdaq therefore proposes a number of measures: amending the Solvency II directive, removing investment obstacles for insurance companies and pension funds, levelling the tax regimes for equity and debt financing, removing obstacles for cross-border investments both within and outside the EU, increasing the flexibility of local markets and eliminating the financial transaction tax.

We must turn savers into investors!

Another measure proposed in the whitepaper is the introduction of a new ”Long-term Ownership” asset class. As an investment strategy, it would allow and incentivize institutions as well as individuals to reserve part of their capital to make long-term investments in smaller emerging and established companies. Today, institutions are restricted, for example, in purchasing shares in companies on the Nasdaq First North, which is contradictory to the CMU goals. With this proposal Nasdaq wishes to put the focus on allowing small and mid-size companies to grow, supported by long-term investments. The reasoning behind this is simple. Approximately 80 percent of the new jobs in the past ten-year period derive from SMEs.

The way forward, in our view, is for the CMU Action Plan to encourage and incentivise the use of the disruptive technology, for instance blockchain, which helps removing informational and operational barriers to investing in Europe’s capital markets. Let me quote our own whitepaper: “From crowdfunding to smarter smartphones and the blockchain, changes are afoot that hold the potential to revolutionise the way we think about and interact with the world of finance as businesses, investors and consumers.”

The European Union must promote an investment culture, so that individuals can make full use of the stock market. Nasdaq’s whitepaper on the Capital Markets Union provides our view on how such goals could be achieved, in order to get Europe back to sustainable growth.