As reported by FEBIS, the EU's new financial services commissioner will set out his plans for a pan-European capital market by the middle of next year, aiming to reduce companies' reliance on banks and help revive the bloc's fragile economy. Channelling more money into small companiesis seen as crucial for Europe's efforts to avoid economic stagnation because small and medium enterprises provide two out of every three private-sector jobs in the European Union. Following the worst financial crisis in a generation, banks are reducing riskier lending to build up capital buffers, a problem in a continent where banks account for 80 percent of corporate loans.
Officials say a capital markets union would also mean the EU moving beyond public subsidies and loans to coordinate financing for companies and infrastructure through project bonds, public-private partnerships and infrastructure funds. However, Deutsche Bank co-CEO Juergen Fitschen said that emulating the United States, where capital markets' funding is far greater than in Europe, would require a shift that Europeans may not be ready for. Mid-sized companies in the United States obtain about five times more funding from capital markets than their counterparts in the European Union, the Commission, the EU executive, says.
The obstacle for smaller companies on capital markets is the challenge of providing continual information to investors, Fitschen said. The EU is likely to try to support companies by providing such services to investors, although it is not immediately clear how this would work in practice, or who would pay for it. One idea is a pan- European system of information providers that could specialise in collecting, classifying and analysing data on small- and medium-sized companies for investors, including the size of companies' outstanding loans.
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