Good afternoon ladies and gentlemen,
I am delighted to be with you in this press room today to present one of the key initiatives of this Commission.
Today we are launching the Capital Markets Union, our project to build a single market for capital for all 28 Member States. Why are we doing it? Because we're committed to boosting jobs and growth in Europe. A Capital Markets Union will help us achieve create those jobs by supporting our businesses, large and small.
President Juncker's initiative to launch a €315 billion investment plan will help to kick start that process. Jyrki Katainen is tirelessly promoting this across Europe. The CMU is part of the challenge to unlock investment for Europe's companies and for our infrastructure projects. It aims to better connect Europe's businesses with investors.
A European market for capital will benefit the European economy across the board. With the CMU, we want to unlock the capital across Europe that is currently frozen and put it to work in support of Europe's businesses, particularly SMEs and start-ups. We want to remove barriers that stand between investors and investment opportunities and we want to make the system for channelling those funds more efficient.
Free movement of capital is one of the four fundamental freedoms; it is enshrined in the Treaty of Rome and it is at the heart of the single market. But fifty years on, we still don't have a fully functioning single market for capital. In many parts of Europe, many companies are still struggling to get funding to expand further. They often lean heavily on banks for their funding needs and far less on capital markets. In other parts of the world, the opposite is true.
This reliance on banks makes the European economy more vulnerable when bank lending tightens, as happened during the financial crisis. The crisis has also meant that the degree of financial market integration across the EU has fallen. Banks and investors are increasingly retreating to home markets. Our capital markets remain fragmented, largely along national lines. This is what we need to fix.
The CMU would act as a major upgrade to a network that connects those who need financing with those who have money to invest. Europe already has a financial network; now it needs better connections to make that network become faster, more developed and more efficient. It's like switching from a dial-up internet connection to broadband internet.
Let me also be clear about what the Capital Markets Union is not about. It is not about pushing banks aside, it is about complementing the role of banks. Europe's banking system will continue to play a pivotal role in Europe's economy: it is very important to local communities; and it is at the heart of capital markets themselves. Many companies will continue to get the bulk of their finance through bank lending.
Even in those Member States where bank lending is functioning well, there will no doubt be some companies - high tech start-ups without a track record for example, where more options for financing would be beneficial. In other EU countries, where banks are not lending, our start-ups and our SMEs are struggling. That's why they need to be able to tap into alternative sources of funding.
Just take one example on venture capital. The US venture capital market is about five times bigger in the US than it is in the EU. If European venture capital markets were as developed here as they are in the US, companies would have been able to tap into an additional 90 billion euros of available funding between 2008 and 2013. More than 4,000 venture capital deals would also have been struck.
Capital Markets Union is about increasing the size of the pie so that everyone benefits: investors – big and small – banks, capital markets and, most importantly, businesses. The CMU it is about giving more choices to companies on where and how they want to get financing.
Of course, this is a long-term project and an ambitious one. We will need to work hard on difficult, sometimes long-standing issues, such as securities laws, investment restrictions, tax treatments of debt and equity, insolvency regimes.
But we are not shy of big objectives: I want all companies to be able to access the funding they need from across the EU; for SMEs to be able to raise finance as easily as large companies; for people who are saving for their future and retirement to be able to benefit from a wide range of affordable investment opportunities; and for investors to come from all over the world to invest in the EU because they know our capital markets are safe, stable and efficient.
This Green Paper marks the beginning of a three month consultation where we want to hear the views from all different actors in the market and from all different sections of society. We're calling for input from parliamentarians, including national parliaments, Member States, citizens, NGOs, SMEs, as well of course as the financial sector from all 28 Member States, because this must be a project for all 28 that will benefit all 28.
Once again, a Capital Markets Union will not happen overnight and it is the cumulative effect of a series of concrete measures which will make the difference. Early progress can already be made in two areas, for which we are launching two complementary consultations today; one on securitisation, the other on the Prospectus directive. Let me give you a flavour of what we're looking at in these two specific areas.
The first consultation aims to work towards building an EU market for high-quality securitisation. In other words, building a market where highly transparent, simple and standardised securitisation instruments can help free up banks' balance sheets so they can lend to households and businesses. Our intention is not at all to revive the bad old days of the subprime instruments and the unhealthy practices of the past. Our door will remain firmly closed to highly complex, opaque and risky securitisation instruments which caused the crisis. We are consulting today all parties on the best ways to single out a category of highly transparent, simple and standardised products. Just take one example - if SME securitisations could be returned – safely – even to half the levels they were in 2007 compared with today, this could be equivalent to some €20bn of additional funding.
The review of the Prospectus Directive – today's second parallel consultation – should make it easier for companies, including SMEs, to raise capital anywhere in the EU, allowing them to grow. The objective is to take a hard look at whether we can remove unnecessary administrative burdens for companies raising capital across the EU without jeopardising investor protection.
We are also encouraging investors to make best use of investment funds such as the new European Long-Term Investment Fund to channel investment to infrastructure and other long-term projects.
I hope that this Green Paper sparks a lively debate across the EU and particularly from those with a stake in stronger capital markets – be they investors, companies or financial market participants. I look forward to engaging with them in this discussion over the coming three months, so that we collectively take joint ownership of this ambitious project and agree on how to make it a reality.
We will present an Action Plan later this year, based on the feedback we receive. That will map out our course of action and determine the most pressing priorities. I look forward to sharing those wit
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