Investment firms operating in the European Union will be
overseen by one, cross-country regulator, according to the
European Commissions updated vision for a capital markets
union that was outlined Friday.
Speaking at the European Financial Integration conference
in Brussels on May 19, European Central Bank vice president
Vítor Constâncio, told delegates that the powers
of the European Securities and Markets Authority should be
strengthened when the U.K. leaves the E.U.
In the longer term, capital markets union warrants a
single, European capital markets supervisor, he said.
The move towards direct European supervisory powers for
certain segments of capital markets seems justified.
E.U. policymakers believe a bloc-specific capital markets
union will lower investment fees, widen the pool of investment
expertise, offer stronger insolvency protection and reduce tax
obligations for fund firms and investors. Global fund firms
that engage in bank-like activities, such as direct lending or
securitizations, within the 27-country trading bloc will likely
be subject to further scrutiny, according to
We need a coherent and well-supervised regulatory
perimeter for non-banks that are engaged in bank like
activities, he said. Heightened vigilance is
required to avoid that such risks spill back and compromise the
soundness of the financial system as a whole.
Andreas Utermann, chief executive of Allianz Global
Investors, wants E.U. members to embrace a Capital Markets
Union, or C.M.U., that is trans-national.
We need to very quickly rethink, to come to a
construct where Capital Markets Union is a trans-national
project, rather than just an E.U. project, Utermann said
at a conference in Luxembourg earlier this month. The
U.K. leaving has put us back decades.
Utermanns comments were underscored by a May 19 report from the ECB that says
financial integration in the euro area stalled last
A Capital Markets Union that is more restrictive in its
dealings with London may result in E.U. fund managers
attracting less money from investors.
The largest pools of capital are outside the E.U. and
policymakers should recognize that, according to Geoff Cook,
chief executive officer of Jersey Finance, a trade group
representing members including Brevan Howard and Invesco
If you limit the C.M.U. to the E.U. 27 where debt is
the principal vehicle for investment and not equity, you limit
your ability to attract foreign direct investment into the
union. They need to be net importers of capital, unless
something changes very dramatically, he said.
Cook said that the deepest pools of capital are in New York
and London, adding that he didnt believe that was going
to change in the immediate future.
Asia has surplus capital, the U.S. has surplus
capital, the Middle East has surplus capital and European
nations, by and large, dont have surplus investment
capital, he said.
The City U.K., a London-based lobby group, is currently
researching a paper on the feasibility of C.M.U. project that
is more expansive, but declined to share details with at this
At the recent ICMA Annual Conference, Steven Maijoor,
chairman of the European Securities and Markets Authority, said
the regulator was considering charging firms from countries outside the
E.U. if they wanted to distribute their products inside the
trading bloc. This fee would help cover the cost of assessing
the risk posed by firms to the regions markets.