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Connections to help achieve Capital Markets Union

MichaelBy Michael Collins on 8 June 2015
Connections to help achieve Capital Markets Union

Private equity connects institutional investors with capital to businesses in need of funding and expertise. Discussions on June 8 in Brussels are an opportunity to position private equity as a critical piece of the European economy before the Commission finalizes its blueprint for Capital Markets Union.

The public hearing entitled “Next steps to build a Capital Markets Union” in Brussels is an important moment in the creation of a single European market for capital. The conference marks the end of the listening phase in this key project and marks the start of the reflection phase, during which Europe’s top policymakers will put together an action plan. In September we should know the specific priorities for this important initiative that will define the remainder of the mandate of this Commission.

Invest Europe has already made a detailed response to the Commission’s consultation document, which put private equity and venture capital at the heart of the Capital Markets Union discussion. The event is another chance for our industry to connect with Commissioners, senior officials and parliamentarians to stress the importance of long-term private investment funds to the European economy.

We will be hammering home the point that private equity and venture capital provides an essential link between investors and small and mid-sized companies. What’s more, the industry provides value through operational expertise and international market access.

Private equity needs to be able to raise long-term capital from institutions like pension funds and insurers without restrictive capital requirements. So we are calling for the Commission to re-open the debate on Solvency II and reduce the risk weighting for private equity. We also want a marketing passport that allows firms to raise capital across borders, without the charges and other hurdles that are appearing in some member states.

We want AIFMD and EuVECA rules that allow private equity and venture capital to invest across Europe without excessive charges or red tape. The tax regime also needs to be fair and supportive for businesses.

We also want the IPO market to function better, with lower costs and less paperwork for small and medium-sized businesses that want to list on exchanges. Institutional investors need incentives to back these companies.

Capital Markets Union is a big idea which aims to give companies more funding options and create a more resilient financial market. It is also major test for policymakers who want to show that Europe’s institutions can be a positive force for individuals and businesses across the Union.

We can already see the Commission is taking a pragmatic approach by focusing on practical measures that could truly make a difference to European businesses. Jonathan Hill, Commissioner for Financial Stability, Financial Services and Capital Markets Union, addressed Invest Europe CFO Forum earlier in June and stressed that policymakers are focused on “better regulation” – as opposed to more regulation.

As Capital Markets Union evolves, we will continue to support it as a means of supporting private equity and venture capital to make critical connections between global investors and European companies.

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