Following the European Commission’s publication of its Action Plan for a Capital Markets Union, EFAMA voices again its continued backing to the Commission’s plan to promote further the financing of the European economy through a well-functioning CMU.
EFAMA has always been a strong supporter of the EU Single Market and supports the Commission’s Action Plan. It is consistent with its aspirations for more single market, more capital market union, and less cross-border barriers, and includes a sensible step-by-step approach that travels in the right direction.
The recent European regulatory momentum has led to considerable improvements within the regulatory environment. The new rules take time and effort to be put in place, and it is crucial to first properly implement them, and then carefully evaluate their impact.
Alexander Schindler, President of EFAMA, commented: “We applaud the Commission’s plans to assess the impact of previous regulatory reforms. This should also serve the purpose of addressing, sooner rather than later, we hope, the current overlapping requirements that are either not fully consistent with each other, or which inadvertently create an unlevel playing field among financial sectors.”
Legal and other barriers still remain. Goldplating practices are one of them. Peter De Proft, Director General of EFAMA, said: “These practices go against the idea of developing further the European single market, and we welcome the Commission’s objective to tackle this issue with Member States”.
In line with developing the single market, EFAMA equally welcomes the Commission’s suggestion to improve the functioning and effectiveness of existing European fund passports. The European asset management industry supports this as an appropriate way to address remaining cross-border barriers, lower the regulatory costs of setting up funds and facilitate the cross-border distribution of investment funds.
EFAMA also supports the creation of a truly single market for personal pensions in the EU. The current market fragmentation makes economies of scale impossible to achieve and limits the choice of pension products and pension providers. A shift in focus is needed towards, yet again, more single market and long-term saving. The creation of a Pan-European Personal Pension Product (PEPP) would have the potential to boost the flow of retail savings into capital markets and therefore to provide long-term funding to the EU economy.
Inherent to more single and capital market is also more investor trust and protection. EFAMA wholeheartedly agrees with the Commission that regulatory consistency is a key element to enable investors to compare between different types of products and make informed investment decisions. The quest for a coherent and workable EU regulatory framework should seek to create a level playing field for investment products in the EU, more transparency, and consequently, increase investor confidence. EFAMA sees no reason for the coexistence of different levels of consumer protection in the current EU regulatory landscape (MiFID II, IDD, PRIIPs). Retail investors should be offered similar disclosure requirements that will allow them a fair and meaningful comparison of similar investment options. Alexander Schindler, President of EFAMA, commented: “We regret this is not the case at the moment, and believe the Commission’s planned assessment of European markets for retail investment products will shed light on how to re-evaluate and improve the current unlevelled situation”.
Equally, EFAMA reiterates its view that consistency is yet to be achieved between the broader objectives of building a CMU and pending EU legislation, most notably the proposed Financial Transaction Tax, whose approach is in full contradiction to that of the CMU. EFAMA urgently advises that the Commission address this issue.
EFAMA welcomes the priority given to ELTIFs as a key vehicle to support infrastructure investment. The EU label of ELTIFs as new products has the potential to unlock and shift important capital towards investments in longer term projects. However if ELTIFs are to become a market success, it will be necessary to align the interests and needs of those investors that ELTIFs seek to attract. The flexibility of the ELTIFs structure and the incentives offered to potential investors will be important factors of their take-up and market success.
For that reason, EFAMA welcomes the Commission’s steps in encouraging fiscal incentives at national level, and in proposing to re-calibrate the capital requirements for insurance companies in Solvency II with regards to the ELTIFs units and shares. Lower risk factor attributed to them can become an important incentive for insurers, which are natural providers of such funds.