Reducing ‘market failures’ and ‘ensuring investor protection’ are critical for the success of the European Capital Markets Union (CMU) project, according to the chair of the European Securities and Markets Authority (ESMA).
During a speech made at the Börse Stuttgart MiFID-Kongress in Germany, Steven Maijoor said that only regulatory intervention can rebuild investor confidence.
Maijoor called for increased measures to prevent market failures which may compromise the long term growth of the project.
The CMU action plan was proposed almost 12 months ago and prioritised increased investor opportunities, a single market for all member states and more resilience and competition within the financial system.
“Market failures are real and most of them are not sufficiently self-corrected. Many of these failures impact investors. I think, for instance, of asymmetry of information, agency problems or detrimental conflicts of interest,” said Maijoor.
“These market failures may affect the functioning of the market and contribute to the perception of capital markets as an unsafe environment. This is why I believe that rebuilding investor confidence can only be achieved through regulatory intervention.
“I also think that investor protection is a means to guarantee the sustainability and ensure lasting success of the CMU.”
Earlier this year the European Commission (EC) called for accelerated reform in the implementation of the first stages of CMU prioritising 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.
Maijoor also outlined specific steps that are needed to be taken in order to achieve investor protection.
“I would like to clarify that when referring to investor protection, I mean more than just information and transparency which are important but not sufficient,” said Maijoor.
“The information asymmetry between sellers of financial products or services and consumers often simply cannot be overcome with some additional disclosures.
“More substantive requirements need to apply to ensure a full protection of investors.”