Brussels
20 March 2017
Reporter: Drew Nicol

EU market participants too busy for CMU


EU financial market participants are too bogged down in regulatory implementation to make the most of capital market opportunities, according to a BNY Mellon regional chief.

Mark John, head of product and business development for Europe, the Middle East and Africa at BNY Mellon, has warned that many market participants are currently too focused on “keeping their heads above the water with the pace of regulatory change” to make full use of the opportunities that the capital markets union (CMU) offers.

He said: “It is without question a positive development, but in the short-term both the buy and sell-side are dealing with only the compliance aspects, alongside their more pressing Markets in Financial Instruments Directive (MiFID) II requirements.”

John, commenting last week on the close of the European Commission’s brief public consultation on its capital markets union plan, suggested that markets won’t be ready to effectively review the past decade’s worth of regulation until 2019, when the union project is bedded down.

The commission’s consultation was cut short of the usual 12 weeks allocated for industry response in order to allow time for analysis in time for the June mid-term review.

“Firms on both the buy and sell side have been suffering from a tunnel vision leading them to compartmentalise regulatory projects, adding challenges and implementation costs,” John added.

“Companies which build a holistic plan based on their desired end result will not only comply with the current cycle of regulation more efficiently, but will be best placed to take advantage of the innovation opportunities which follow in a strengthened and transparent financial world.”

The EU’s CMU involves a €315 billion investment plan and a renewed drive to improve the free movement of capital, which remains fragmented across member states.

In a statement on the consultation, the European Commission said: “The review will seek to strengthen the current policy framework for the development of capital markets by updating the proposed actions and integrating complementary measures in response to key challenges.”

European Commission vice president Valdis Dombrovskis, responsible for financial stability, financial services and the CMU, said: "We have built good momentum behind the CMU project and we are well on our way to completing the first wave of measures. Now, we want to move faster and be more ambitious. This mid-term review consultation will help shape the next phase of our work to build a single market for capital in Europe.”

Jyrki Katainen, the commissioner responsible for jobs, growth and investment, added: "Progress towards building a CMU is crucial to strengthen the third pillar of the Investment Plan for Europe.”

“It will contribute to creating an investment friendly environment and make it cheaper and more interesting for insurance companies and banks to invest in long-term infrastructure projects."

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