EC calls for urgency with CMU implementation

Various developments have led to the CMU project being sidelined.
By Paul Walsh
The European Commission (EC) has called for accelerated reform in the implementation of the Capital Markets Union (CMU).

In a communication from the EC to the European Parliament and the European Central Bank (ECB) the Commission has called for the first initiatives of the CMU action plan to be implemented immediately.

The CMU action plan was proposed almost 12 months ago and prioritised increased investor opportunities, a single market for all 28 member states and more resilience and competition within the financial system.

In addition, a meeting of the European Council on 28 June prioritised a standardised securitisations package to free up capacity on banks’ balance sheets which could provide an additional €100 billion of funding to the European economy.

The EC has stressed the urgency for the first wave of CMU initiatives as soon as possible to “have an effect on the ground”.

CMU had sought to harmonise a number of EU processes and introduce mechanisms by which to boost non-bank lending into the real economy.

Experts had acknowledged it would take time to push through but engagement with the EC by the financial services industry had been positive.

The Communication also urges that the rapid growth of FinTech has the power to “transform” EU capital markets and that the CMU must keep pace with technological developments.

Global Custodian investigated the current state of the CMU project in July following the UK’s decision to leave the European Union at the end of June.

Material changes to the CMU are likely to occur as a result of Brexit with EU policymakers and regulators likely to devote resources to managing the aftermath of Brexit.

Representatives from the UK may also be side-lined in CMU developments with EU officials likely to encourage more euro-denominated trading and clearing activities to decamp from London to other areas of the Eurozone.

The Commission has also vowed to take the “changing political context” into account along with other priority areas prior to a mid-term review in 2017.