FAMA has given a strong early welcome to the European Commission’s Green Paper for a Capital Markets Union.
The industry body believes the EC’s “Building a Capital Markets Union” consultation paper, launched in Brussels today, highlights the clear need for a Capital Markets Union which is primarily focused on investors.
EFAMA believes that investors are the cornerstone of the asset management industry and that an integrated capital market in the EU will help unlock capital, shift it towards investments in long-term projects, and ultimately reduce the cost of investment funds and pensions savings for investors. There is no doubt that the fund management industry and its investors can play a huge role together in the long term financing and rebuilding of the European economy.
At a time of important financing and saving challenges, it is clear that Europe needs to encourage the financing of its real economy via the capital markets. A more capital market based economy is one of the key solutions that will enable Europe to get back on the road towards growth recovery, and European asset managers have a crucial role to play in this changing landscape.
Peter De Proft, Director General of EFAMA, says: “The European asset management industry contributes to the financing of the economy and long-term saving by strategically investing the savings of households and institutional investors in concrete projects of businesses and governments. EU policymakers are right in encouraging this contribution because this will diversify the sources of funding of the economy”.
The European Long-term Investment Funds (ELTIF) Regulation is another concrete step towards meeting Europe’s needs for growth, as it has the potential to become an important tool for long-term financing. For ELTIFs to become a market success it is necessary to ensure an alignment between the needs of European investors and those of the EU economy, and that the right framework and incentives are firmly in place.
EFAMA believes that an EU-single market for personal pensions will also play an important role in broadening capital markets in Europe. In particular, a pan-European pension product would help overcome the current fragmentation of the European pension systems by stimulating cross-border market integration. Equally, encouraging retirement savings would increase the amount of capital that would be readily available to be channelled towards long-term investment.
De Proft says: “Our proposal is to create a new type of pension product that could be offered to EU citizens in addition to the pension products currently available at national level”.
Asset managers also support EU initiatives towards high quality standards for securitisation transactions. Securitisation, if framed appropriately, improves returns towards investors in a risk controlled way. By buying securitised instruments, asset managers are financing the real economy. When recognised as high quality investments, these instruments become safer to invest investors’ money.
Lastly, EFAMA welcomes the Commission’s objectives to look at remaining obstacles to an integrated capital markets union. One such possible hurdle for the CMU is the proposed FTT, which has the potential to cause distortions, thus endangering the EU single market and jeopardising long-term savings, growth and investment.
EFAMA now looks forward to contributing to the debate launched today by the European Commission.