Avalanche and EU Capital Markets Union from a Nordic perspective - - PowerPoint PPT Presentation

EU Financial Services Regulatory Avalanche and EU Capital Markets Union from a Nordic perspective

Annual ICMA-NCMF Joint Seminar: Bond Markets - new products, new challenges 22 January 2015, Helsinki

pp.kk.vvvv Osasto

Finland

Nordic traditions (”less is more”)

• Law obedient culture since medieval ages
• Bottom-up democratic heritage (”ting”)
• No history of political or military dictatorship
• Egalitarian culture and mutual trust
• Private law general clauses - pacta sunt

servanda - market-developed best practices

• Transparent and accountable authorities
• Quality over quantity and speed in law-making
• -> Nordics could certainly live with less rules

22.01.2015 2 Financial Markets Department / Ilkka Harju

pp.kk.vvvv Osasto

Finland

CMU motivations

• Insufficient risk sharing across borders & sub-
• ptimal capital allocation
• Cross-border capital flows before crisis intermediated

through wholesale banking based on debt instruments (sudden stops and financial fragmentation)

• Low diversity of funding opportunities
• High transaction costs for cross-border funding
• Liquidity provider of last resort in capital markets
• European structural reform agenda
• Funding needs of high-growth firms
• UK question is in a central position

22.01.2015 3 Financial Markets Department / Ilkka Harju

pp.kk.vvvv Osasto

Finland

CMU asymmetry with Banking Union

Banking Union:

• Banks, Stability
• Centralize control, Euro area
• Crisis response

Capital Markets Union:

• Non-bank finance, Growth
• Develop markets, EU28
• Post-crisis agenda
• --> Shadow Banking seen partly in positive light?

22.01.2015 4 Financial Markets Department / Ilkka Harju

pp.kk.vvvv Osasto

Finland

Actually, non-bank finance

Multiple market segments

• Equity and credit
• Securities and specialized intermediaries
• Venture capital, private equity, public

equity

• IPOs, corporate bonds, debt

securitization, loan funds

• Leasing, consumer finance…

22.01.2015 5 Financial Markets Department / Ilkka Harju

pp.kk.vvvv Osasto

Finland

Objectives (hopefully…)

Develop and increase:

• Financial system and stability of EU28
• Sustainable economic growth
• Cross-border issuance and long-term investment
• Financing needs of SMEs and start-ups
• Competition between different financing sources
• Liquidity and transparency in the capital markets
• Competitiveness of EU as a place to invest
• Investment of European capital outside the EU
• Inward flows from third countries

Decrease: Obstacles to market access + Thresholds of growth market capital + Dependence on bank financing

22.01.2015 6 Financial Markets Department / Ilkka Harju

pp.kk.vvvv Osasto

Finland

Nordic ”shopping list”

• CMU to cover EU28 as a whole, not only eurozone
• Efficiency of financial markets in all Member States
• SME and start-up financing is dominantly local in nature
• Fair, non-discriminatory level playing field for access to capital
• Analysis needed of urgency and of significance of impact
• Impartial, objective, methodologically consistent and reliable data
• International comparative competitiveness surveys (WEF)
• Deregulation, where possible / Double reporting requirements
• Unnecessary regulatory burden / Principle of proportionality
• Commission law making processes / Consultations

22.01.2015 7 Financial Markets Department / Ilkka Harju

pp.kk.vvvv Osasto

Finland

CMU – next steps

• Preparation of Commission Green Paper

(underway, February)

• Consultation of stakeholders (Q1/2015)
• High-level conference based on

consultation (June 2015)

• Publication of CMU Action Plan

(September)

22.01.2015 8 Financial Markets Department / Ilkka Harju