On November 20, 2017, the European Commission published a Report of the Commission Expert Group on Corporate Bonds on improving the European corporate bond markets. The review of the EU corporate bond market is part of the European Commission's Capital Markets Union.
The Expert Group makes 22 recommendations which relate to six objectives for improving the functioning of the corporate bond markets in the EU. The recommendations include, among others, amending the Market Abuse Regulation to ease the market sounding requirements although no specific recommendations on how to achieve that are made. The requirements have been viewed as imposing disproportionate burdens on companies, underwriters and other persons. The Expert Group considers that the requirements are aimed at large and liquid markets and not the more local, less liquid markets, such as the corporate bond markets and that the effect of the burdensome requirements may deter intermediaries from conducting market soundings and also deter the less frequent issuers from carrying out new issuances.
The Group also recommends adjusting the treatment of corporate bonds in capital and liquidity requirements, in particular, the Liquidity Coverage Ratio, the Net Stable Funding Ratio and the Leverage Ratio and promoting convergence in interpretation by Member States of the marketing rules for Alternative Investment Funds and Undertakings for Collective Investment in Transferable Securities. The Expert Group also urges the Commission to accelerate its plans to introduce a recommendation on private placements, so as to encourage private placements of corporate bonds and share the good practices developed in some Member States with other Member States. The Expert Group further recommends that the European Commission and the European Securities and Markets Authority assess the impact that different EU legislation has on the corporate bond markets, consolidate overlapping and inconsistent requirements and set up a specialist industry group to advise regulators on how to adapt the framework for corporate bonds.
The Expert Group calls on the Commission to set out a clear way to bring about the implementation of the recommendations. The recommendations were discussed at a public hearing on November 24, 2018.
The Report is available at: https://ec.europa.eu/info/sites/info/files/171120-corporate-bonds-report_en.pdf and the related Study on Drivers of Corporate bond market liquidity in the European Union is available at https://ec.europa.eu/info/sites/info/files/171120-corporate-bonds-study_en.pdf.
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