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Capital markets union: The EU breaks down barriers to business growth and investment

30 September 2015

Capital markets union: The EU breaks down barriers to business growth and investment

The uphill struggle faced by businesses looking to access capital is finally set to be levelled as the European Commission launches plans to deliver better functioning capital markets, enabling entrepreneurs and companies access to a variety of asset-backed funds.

Dr Kay Swinburne MEP, European Conservatives and Reformists Group economics spokesman, welcomed the plans, which were presented as the commission also announced a review of its post-crisis legislation to see whether it is working as intended.

The Capital Markets Union proposals seek to reduce small companies’ reliance on banks which have become more reluctant to loan since the crisis. It seeks to open the market for companies to raise capital via bonds and shares in particular by resurrecting the market for bundled loans, reforming the prospectus directive and the patchwork of insolvency and securities regimes across Europe.

Writing in the Financial Times this morning, Commissioner Hill said:

“In the US, small and medium-sized companies raise about five times as much funding from capital markets as in the EU. If European venture capital markets were as deep as those in the US, our companies could have raised an extra €90bn over the past five years. And the differences between EU countries are even bigger than those between Europe and the US.”

Responding to the announcement, Kay Swinburne said:

“The European Commission is finally putting the post-crisis phase behind it and looking at ways to deliver real business-led growth and the flow of capital across Europe’s borders.

” Capital Markets Union needs to create the right conditions for alternative financing products, including better functioning equity and bond markets for smaller companies, together with a framework for more novel sources for financing, such as crowd funding and peer to peer platforms.

“Small businesses and entrepreneurs should not see the bank as the only source of accessing finance and with these proposals we will unblock the many obstacles they face.

“The European Commission is right to review the effect of laws already put in place since the financial crisis. The first rule of all EU law-making is that it produces unintended consequences, and some post-crisis legislation was so rushed that its effect on the ground must now be measured and addressed.

“I hope this marks a phase where the European Commission is no longer looking at knee-jerk financial services law-making and instead asking how it can break down those barriers to business growth in the single market.

“This is an initiative primarily to remove unnecessary obstacles to the free flow of capital across the 28 Member States and beyond.

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