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Opinion
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CMU: Something new, something old, something borrowed, something (making you) blue

11 Jun 2020

Wednesday’s publication of the High-Level Forum Report on the CMU marks an important step towards the launch of a CMU 2.0. It comes nearly six years after the President Jean-Claude Juncker first announced the outline of the project and at a point in time, with COVID-19 raging and a BREXIT looming, where it is more needed than ever.

From the start, the CMU project has rightly been based on the key principle that European capital markets should never grow for themselves, but to transform European savings into investments into businesses.

As a result, the bulk of the CMU project should not so much be about the various corners of capital markets but about the relationship of these markets with their investors. In other words, on the crucial link between the savers and those investing day after day on their behalf.

From that perspective, the new approach to placing equity at the heart of the CMU should be praised.

It is good and right-thinking by the high-level forum. Equally the revitalisation of some old initiatives is the right one. All in essence, these suggestions are ticking a lot of boxes to Invest Europe and as such offers a good grounding for our members’ commitment to invest in the future of Europe:

  • Further develop the ELTIF product;
  • Revise the Solvency II risk weights for equity;
  • Introduce a new category of semi-professional investors.

And they all have the same objective: making sure that investors are as comfortable investing capital markets as they are using the banking system.

Action Plan based on the HLF report

As the Commission starts its work on an Action Plan based on the HLF report, it should most definitely borrow and further that perspective, that the cornerstone of the CMU 2.0 is about the incentives and – unfortunately – disincentives for these investors to choose the capital market route.

The fact that the HLF, which was mostly composed of banks and exchanges, still ends with a range of recommendations, particularly laying out the importance of equity in a diverse capital market, is quite telling and gives kudos to the participants in the forum for not (entirely) being strapped in their own perspectives.

It’s early days from the publication of the report and we will choose to ignore, for a while, the missed opportunities and the not-so-wonderful initiatives that could make us blue and instead just sum up, that from our perspective, the private equity and venture capital industry, composed of long-term closed-ended funds, are ideally placed to channel the ambitions of the HLF into real actions and we look forward to the dialogue with the European Commission, the European Parliament and the Member states about ways to turn the best of the recommendations from the HLF into proper initiatives with the potential of impacting positively the markets that European businesses need to prosper.

Learn more about the Final Report of the High-Level Forum on the Capital Markets Union.

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