The EU Economic and Financial Affairs Council (Ecofin) is to decide on the further preparation of the Capital Markets Union in its meeting on June 19th. The purpose of the union is to facilitate capital movement and diversify corporate financing options. The Finnish financial services sector supports the plan, but wants to emphasise that legislation should not be based on a “one size fits all” principle.
Piia-Noora Kauppi, Managing Director of the Federation of Finnish Financial Services, comments that the residual effects of the financial crisis are still strongly felt in Europe. One major problem lies in the acquisition of financing, which seems considerably more difficult within the European Union than in non-EU G20 countries.
”We sincerely support the idea of diversifying financing options for corporations, even if Finland is, compared to other EU countries, doing well in this regard and has banks with strong financing capacity. Improving the structure of capital markets creates new financing possibilities, particularly for innovative and quickly growing SMEs. However, for the majority of corporations, bank financing will continue to be the primary financing channel – and sometimes the only one”, Kauppi says.
Kauppi maintains that the Capital Markets Union is not a structural reform like the banking union, but primarily a Commission programme. According to Kauppi it should not be built by the means of excessive harmonisation of legislation; all the principles of better regulation, including impact assessment of different options, should be followed.
”Excessively detailed regulation can easily lead to a situation where the proposed models no longer suit anyone very well”, Kauppi remarks.
Kauppi proposes that the Commission should evaluate national best practices and suggest measures to improve the EU legislative process where it is too slow. “For example, the project to improve the Finnish bond markets, started by the Ministry of Finance, is one such measure that achieves concrete results much faster than EU level actions would.”
Kauppi also stresses that the Capital Markets Union must not be used to boost the role of public authorities in the markets, and that public authorities should not intervene with investment decisions. “EU legislators should also stop preparing regulatory projects that weaken the markets, like the Financial Transaction Tax or banks’ structural limitations”, she adds.
When the Finnish government commented on the Green Paper on Capital Markets Union, it also highlighted the importance of thoroughly conducted impact assessment and the point that new regulation should be issued only if it has clear additional value.
The Commission received a staggering 425 responses to its public consultation on the Capital Markets Union, and is now processing them. The Commission’s summary and detailed action plan will be finalised in September.