On 18 February 2015, the European Commission (the "Commission") published its Green Paper on Building a Capital Markets Union ("CMU") inviting contributions from all interested parties by 13 May 2015 and aiming to implement a fully functioning CMU by 2019. The CMU aims to provide a single rulebook for all EU Member States thereby improving access to financing, increasing and diversifying the sources of funding and increasing market effectiveness and efficiency.
The Commission observes that EU capital markets are underdeveloped in comparison to the US and other jurisdictions. Europe is more reliant on traditional bank finance which makes the economy, particularly small and medium enterprises ("SMEs"), more vulnerable when bank lending tightens. The Commission contends that the CMU will increase investment and make the financial system more stable by opening up a more diversified range of funding sources.
While broad in scope, the consultation identifies several early action priorities. In 2015, SME credit scoring workshops will be held aiming to widen the SME investor base by developing the provision of SME credit information and scoring. The recently finalised European Long-Term Investment Funds ("ELTIFs") regulatory framework, which aims to boost long-term investment, will be an integral part of the CMU. Views are sought on how ELTIF take-up can be encouraged, including how advantages currently available to national regimes can be extended to ELTIFs. The Commission also seeks to support the development of private placement markets in tandem with on-going market-led efforts to agree common standards.
Prospectus Directive Review
Contemporaneously with the Green Paper, the Commission has launched a public consultation on the Prospectus Directive aiming to make it easier for companies (including SMEs) to raise capital. Opinions are being sought on a wide range of issues, including:
- the scope of the prospectus requirement and exemptions;
- ensuring appropriate levels of investor protection;
- reduction of costs;
- cross-border issues; and
- how to make the regime more accessible for SMEs.
Simple, Transparent and Standardised Securitisation
Further, the Commission has also launched a public consultation on securitisaton. The scope is to consider a possible EU framework for simple, transparent and standard securitisation programmes with the aim of gathering information and views from interested parties on how to create a sustainable market for high-quality securitisations. Opinions are sought on the impact of a harmonised and / or optional EU wide securitisation structure and, if pursued, what aspects should be covered by such an initiative e.g. the legal form of SPVs, transfer of assets, noteholder rights and subordination rules.
The Irish Government's International Financial Services sector's strategy for 2015-2020 ("IFS2020"), published March 2015, aims to position Ireland as European centre of excellence for securitisation techniques and products. To achieve this goal, focus will be placed on delivering securitisation educational courses and aligning Ireland with EU programmes as they evolve.
The Department of Finance and the European Commission have convened a CMU workshop which took place on 31st March 2015 in Dublin. The workshop heard from speakers from the EU Commission and a number of specialist interest groups from the public sector and financial services sector (including eminent lawyers and professionals) in Ireland. The workshop panellists included Paul Egan, Partner and Chairman of our Corporate Team. We anticipate that the workshop will begin the tasks of educating practitioners on CMU and formulating Ireland's response and contribution to the consultation process.
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