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Capital Markets Union High Level Forum Recommendations

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Capital Markets Union High Level Forum Recommendations A NEW VISION FOR EUROPE’S CAPITAL MARKETS Final Report of the High Level Forum on the Capital Markets Union Disclaimer This report is prepared by the High Level Forum set up by the European Commission. The views reflected in this Report are the views of the members of the Forum. They do not constitute the views of the European Commission or its services, nor provide an indication to the policy approach that the European Commission may take in its future work on the Capital Markets Union. An interactive version of this publication, containing links to online content, is available in PDF format at: https://europa.eu/!gU33Hm scan QR code to download A new Vision for Europe’s capital markets Final Report of the High Level Forum on the Capital Markets Union June 2020 CREDITS All images © European Union, except: cover: © Hurca! - stock.adobe.com pages 4, 8: © Hurca! - stock.adobe.com page 11: © apinan - stock.adobe.com page 15: © IRStone - stock.adobe.com page 18: © vectorpouch - stock.adobe.com page 22: © bizvector - stock.adobe.com page 27: © VectorMine - stock.adobe.com A NEW VISION FOR EUROPE’S CAPITAL MARKETS - FINAL REPORT Contents PREFACE . 2 1 . THE EUROPEAN UNION NEEDS CAPITAL MARKETS UNION MORE THAN EVER . 4 2 . THE PLAN . 8 A . Creating a vibrant and competitive business environment . 11 B. Building stronger and more efficient market infrastructure . 15 C . Fostering retail investments in capital markets . 18 D . Going beyond boundaries across the internal market . 22 ACCOMPANYING MEASURES AND PRINCIPLES . 26 THE OVERALL BENEFITS OF THE RECOMMENDATIONS . 27 SUMMARY OF RECOMMENDATIONS . 28 ANNEX - CMU HLF RECOMMENDATIONS . 30 A . Creating a vibrant and competitive business environment . 30 1. Recommendation on an EU Single Access Point............................................30 2. Recommendation on European Long-term Investment Funds................................37 3. Recommendation on encouraging insurers to providing more financing for capital markets .....41 4. Recommendation on market making and re-equitisation of markets .........................46 5. Recommendation on scaling up the European securitisation market..........................52 6. Recommendation on improving the public markets ecosystem ..............................66 7. Recommendation on crypto/digital assets and tokenisation .................................74 B. Building stronger and more efficient market infrastructure . 77 8. Recommendation on central securities depositories regulation ..............................77 9. Recommendation on shareholder identification, exercise of voting rights and corporate actions .79 10. Recommendation on cloud ............................................................82 C . Fostering retail investments in capital markets . 85 11. Recommendation in the area of pensions ...............................................85 12. Recommendation on financial literacy/education and investment culture ....................89 13. Recommendation in the area of distribution, advice, disclosure.............................98 14. Recommendation on open finance .................................................... 109 D . Going beyond boundaries across the internal market . 112 15. Recommendation on withholding tax ................................................. 112 16. Recommendation on insolvency ...................................................... 114 17. Recommendation on supervision ..................................................... 116 THE HIGH LEVEL FORUM - MEMBERS . 121 THE HIGH LEVEL FORUM - OBSERVERS . 123 A NEW VISION FOR EUROPE’S CAPITAL MARKETS - FINAL REPORT Preface Bringing about an EU Capital Market, i.e. a true single market for capital for everybody, remains, rightly so, a priority for those who want to make Europe stronger, resilient and dynamic. With Covid 19 it is now urgent in order to rebuild the European economy. The High Level Forum has brought together 28 experts from a wide spectrum of professional and national backgrounds to recommend an array of measures that should get us closer to one single market for savings, investments and raising capital for our dynamic firms so that they can grow in Europe. The report contains not abstract ideas or high level principles that should be achieved, but very precise and clear recommendations on what should be done in order to move Europe forward. We emphasise that this is not a menu from which one can order two or three courses, and go home satisfied. The 17 clusters of measures are mutually reinforcing, and dependent on each other. Why, one may ask, is a functioning capital market even more important now as the EU economy is trying to recover from a global health crisis. Why was it important before COVID 19, and what has changed? Europe has for decades struggled to make its capital markets work as one, and to a large degree still has 27 capital markets, some fairly large, and quite a number rather small. The largest market, the UK, has left the EU, making the financing of the EU economy dependent on a jurisdiction where rules may well start diverging in the medium term. With the UK having left a question for politicians is how much of this market one wants onshore, and how much offshore. The European banking system, although better capitalised and more resilient, is not sufficient by itself to provide the amount of credit the EU economy will need to recover from the crisis. Without stronger market financing, economic growth will remain subdued. Europe’s innovative firms have over decades grown from small to medium, and more often than not had to leave Europe to find the finance that could facilitate their further growth. 27 separate markets do not provide that in adequate form and depth. European citizens as long-term savers and individual investors – who are one of the primary funders of the capital markets and of the economy - too often get poor net long term real returns. Providing cross-border access to simple, comparable, cost- efficient and transparent products that provide sustainable value for money is key for savings, and key for investments. 2 A NEW VISION FOR EUROPE’S CAPITAL MARKETS - FINAL REPORT Climate change remains at the forefront of our concerns. Financing requirements dwarf the possibilities that governments on their own have, and will have. With a deep and dynamic capital market, the joint financing capacity will facilitate a green transition that works for our citizens. This is, of course, not the only major challenge our finances are facing. Pension sustainability in times of high and rising government liabilities requires market- based pension systems that supplement state systems. Only with the two working together can those who will be retiring in the coming decades have the retirement benefits they are today expecting. COVID 19 has ravaged the global economy, and Europe is well poised to emerge over time from this crisis in a balanced manner. Governments and European institutions have reacted well to these challenges. However, regional and social effects may well be quite unequal, also in view of the huge amounts of funds required. Again, our recovery will not come about as hoped if we do not harness the power of all national capital markets for financing the growth of the future. We do not want this to be only growth of Member State A or Member State B – we want this to be European growth. With the collective power of integrated capital markets that work for all this can come about for all. Without, we have our doubts. We therefore commend this report to the Commission to make wise proposals, to the European Parliament and the Council to be proponents of a capital market that works, also in legislative reality. And to all who have an interest and a stake in this to promote our aim. In short, a European Capital Markets Union, a savings and investment union, that works for all. I would like to sincerely thank, in my name and that of my co-chairs, colleagues in FISMA who have assisted us with enthusiasm. The range and depth of their knowledge has been impressive. We would also like to thank representatives of the institutions that have participated as observers, who also have added tremendously to the quality of our discussions, as have a number of guests whom we invited for specific technical discussions. Thomas WIESER Chair of the High Level Forum on Capital Markets Union 3 1. The European Union needs Capital Markets Union more than ever Capital Markets Capital Markets Union has been essential investment flows throughout Union needed for needed in the EU for many reasons, for the EU economy benefitting citizens and many reasons, for many years. many years. It is long overdue. Since business. we now face the biggest economic crisis in peacetime in 90 years, it is First responses to the COVID-19 Effective capital markets that work now vital and extremely urgent to outbreak have relied on a massive for all – more accomplish it. injection of public support to the real urgent than ever. economy and to the most affected parts The importance of effective capital of the population by the EU, Member markets that work for all - for the future States’ governments and the European financial well-being of European citizens Central Bank. and for the growth and development of EU companies and economies - has Given the emerging depth of economic been recognised for some time, but is retrenchment, more public intervention more urgent than ever. The impact of the will be needed, including through the EU COVID-19 outbreak will last for years.
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