Europe needs stronger, deeper capital markets. Our economy is about the same size as America’s, but our equity markets are less than half the size of theirs — and our debt markets less than one-third. [...]
The benefits of stronger capital markets are also clear. We could give Europe’s businesses more choices over funding, helping them to invest and grow; increase investment in infrastructure; draw in more funding from outside the EU; help businesses sell into bigger markets; and help those saving for their old age. And, by reducing reliance on bank funding, we could help make the financial system more resilient, particularly in the eurozone.
All 28 members of the EU share this view. So does the European Parliament. We will identify the barriers to the cross-border flow of investment and, in building our capital markets union, work out how to overcome them step by step. [...]
To help free up banks’ balance sheets, making it easier for them to increase lending, I am proposing a new EU framework, with lower capital requirements, to encourage simple, transparent and standardised securitisation. We need to make it more attractive to invest in infrastructure, so today I will announce a new infrastructure asset class that will attract lower capital requirements under the Solvency II regime for insurers.
Start-ups in need of capital should not be forced to go to the US, so I will be proposing measures — including changes to legislation — to encourage the European venture capital scene to thrive. We need to make it easier for companies to raise funds on the public markets, too. So before the end of the year I will propose plans to overhaul the prospectus directive, which governs what companies must tell investors before floating on the stock exchange, to make it less burdensome for business.
To channel more investment from Europe’s citizens to its businesses, we need to improve retail financial services. This means looking at them from the consumer’s point of view. And we also need to look into the combined effect of the legislation introduced in recent years in response to the financial crisis. This is not to question the overall architecture but to ask whether the laws we have passed are working as hoped. I will today begin a consultation to see whether the legislation has had unintended consequences — for example, making it harder for businesses to invest in the economy.
The creation of a capital markets union is a big opportunity for Europe. The UK, as Europe’s leading financial services centre, has a major contribution to make.
This is a good example of the practical benefits that membership of the single market can bring. But to make the most of it, and to help influence the rules which will set the terms of engagement for years to come, the UK needs to be shaping the system — not looking on while others set the rules.