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EU launches landmark green paper

20 February 2015

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The European Commission has launched its landmark project to unlock funding for businesses in Europe.

A Green Paper on a Capital Markets Union (CMU), a single market for capital in the EU's 28 member states, launched on 18 February for a three-month consultation period.

The outcome of the Green Paper will shape an action plan to help unlock non-bank funding which, according to the Commission, will enable start-ups to thrive and larger businesses to expand.

EU Commissioner Jonathan Hill, who is responsible for financial stability, financial services and CMU, said: "Capital Markets Union is about unlocking liquidity that is abundant, but currently frozen, and putting it to work in support in Europe's businesses."

"The free flow of capital was one of the fundamental principles on which the EU was built," he added.

The National Association of Pension Funds said the industry would be looking to the policy-makers to help deliver investment opportunities in Europe, but urged caution regarding reforms.

"We welcome the Green Paper's emphasis on strengthening European capital markets and the Commission's commitment to creating an environment conducive to long-term investment," said NAPF chief executive Joanne Segars.

"But it is important to remember that any reforms to the functioning of European capital markets should be seen through the lens of providers of capital, in particular, pension funds."

"This will help policy-makers to avoid unintended consequences where intermediaries benefit at the expense of funds and ultimately future pensioners."

NAPF members have over €1tn of investments in the EU and global economy.

"Our members are looking to policy-makers to help deliver the supply of investment opportunities needed which are suitable for institutions that are investing to meet long-term liabilities," said Joanne Segars.

The Commission is seeking feedback from the European Parliament and the Council, other EU institutions, national parliaments, businesses, the financial sector and all those interested. All stakeholders and interested parties are invited to submit their contributions by 13 May.

After the consultation period it will identify how four key objectives can be met, including improving access to finance, helping SMEs to raise finance, removing barriers to cross-border investments, and diversifying funding.

Investment management firm Blackrock said putting the investor at the heart of CMU reforms is essential.

A paper, published by BlackRock, said: "Policymakers should look closely at how and why investors allocate their capital, develop an understanding of specific investment needs, and ensure that their capital is treated fairly when invested in capital markets."

First published 19.02.2015

Lindsay.sharman@wilmington.co.uk