16 November 2020

EFAMA: Initial reactions on the new Capital Markets Union action plan - Keynote Speech by Tanguy van de Werve

EFAMA is very supportive of the CMU initiative and has been since its launch in 2015.Decisive actions are clearly needed to make CMU a reality and it is very important that the entire financial services industry gives it its full support.

As the voice of the European investment management industry, we represent the interest of our members vis a vis the European policymakers as well as international standard setters. We are based in Brussels and engage with the European institutions on a wide range of topics, including UCITS, AIFMD, PRIIPs, liquidity management, cost & performance, ETF, MMF, ELTIF, Sustainable finance, macro prudential supervision, to name just a few.

Last year I spoke at this very same event and shared our views on the progress made towards Capital Markets Union (‘CMU’ in short), the flagship project of the Commission to promote market-based finance in the EU.
Since then the European Commission published -two months ago- its new CMU Action Plan and now is therefore a good time to share with you some reflections on this new EU roadmap.

EFAMA is very supportive of the CMU initiative and has been since its launch in 2015.
Decisive actions are clearly needed to make CMU a reality and it is very important that the entire financial services industry gives it its full support.
Looking at the new Action Plan, we support the focused approach taken by the Commission and the various actions being considered. The emphasis on supporting the development of local capital markets is particularly welcome as a well-developed financial ecosystem is still missing in many Member States.
For the purpose of this short intervention, I will focus on a few themes. I will not be able to elaborate much but hopefully this will give you a good flavour of where we stand concerning some of those issues.

First Public equity

There is way too much debt in the system and not enough equity. This is particularly worrisome as it makes our economy more vulnerable to a downturn and does not allow the proper financing of innovative companies.
We need vibrant European public equity markets. We welcome the European Commission’s efforts in that space. This is particularly important for UCITS given the assets that are eligible for UCITS investments.

Then comes Retirement savings

There is an Increasing retirement savings gap in most European countries. This is a real pension time bomb. And could give rise to potential unrest. This is really a huge social challenge, a challenge which is probably as pressing as the need to transition towards a far more sustainable development model.
Clearly not enough is being done in most MS as national politicians lack the political courage to undertake the necessary structural reforms.
The EC intends to facilitate the monitoring of pension adequacy in Member States through the development of pension dashboards. It will develop best practices for the set-up of national tracking systems for individual Europeans. It will also launch a study to analyse auto-enrolment practices and may analyse other practices to stimulate participation in occupational pension schemes, with a view to developing best practices for such systems across Member States.
While this is all welcome, this lacks ambition and teeth. At the very least we would have expected the results of the monitoring to feed into the European Semester process, as will be done for the efficiency of national insolvency regimes.
The PEPP was part of the previous CMU AP – our members are telling us that they are unlikely to enter the PEPP market given the restrictions applying to the Basic PEPP, especially as it relates to the scope of the 1% fee cap. This is a missed opportunity, and it is to be expected that the PEPP market will be dominated by capital-guaranteed products which is not necessarily in the best interest of investors in the long run.

Tax is next

Withhoding tax relief procedures remain very complex and constitute an obstacle to cross-border investments. So, we welcome the action envisaged by the EC to propose a common, standardised, EU-wide system for withholding tax relief at source...

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