The European Commission launched a comprehensive package of measures in early December designed to realise the full potential of the single market for financial services. The package is a key component of the EU Savings and Investments Union (SIU) strategy, which aims to create a more integrated, efficient and competitive financial system and to support businesses across Europe in accessing funding. In a statement, the Commission said that more integrated capital markets are crucial for strengthening the EU’s economic power and achieving strategic goals. Simplified access to capital markets lowers costs and enhances market attractiveness for investors and companies across all member states, regardless of size.
The measures adopted fall under four main headings: removing obstacles to market integration; enabling innovation; streamlining regulatory oversight; and simplifying the capital markets framework. Under the first heading, the package seeks to abolish barriers to integration in trading, post-trading and asset management, and to enable market participants to operate more seamlessly across member states. This would have the effect of reducing cost differences between domestic and cross-border transactions.
Specific market integration measures proposed include increasing opportunities for passporting (the system that permits companies authorised in one EU or EEA member state to do business in any other state without the need for further authorisation) for Regulated Markets and Central Securities Depositories; the introduction of ‘Pan-European Market Operator’ (PEMO) status for trading venue operators, thereby streamlining corporate structures and licences into a single entity or single licence format; and facilitating cross-border distribution of investment funds.
In respect of enabling innovation, the package aims to remove regulatory barriers to innovation related to distributed ledger technology (DLT), a system whereby data is shared across a network of computers in various locations, facilitating secure and transparent record-keeping. The new measures adapt the regulatory framework to support these technologies and amend the DLT Pilot Regulation to relax limits, increase proportionality and flexibility, and provide legal certainty. This will encourage the adoption of new technologies in the financial sector.
The Commission says that improvements to the supervisory framework are linked to the removal of regulatory barriers. The measures just announced therefore aim to address inconsistencies and complexities that arise from the fragmented nature of national supervisory approaches, rendering regulatory oversight more effective and favourable to cross-border activities. This will involve transferring responsibility for supervision in a number of critical areas, such as certain trading venues, to the European Securities and Markets Authority.
Lastly, the measures will further simplify the capital markets framework by converting directives into regulations, streamlining level 2 empowerments (the detailed, technical rules that flesh out primary laws (directives or regulations) but which often add significant cost and/or complexity), and reducing the options and discretions available to national authorities in order to prevent so-called “gold-plating” (the process whereby the powers of an EU directive are extended when being transposed into the national laws of a member state).
The Commission’s proposals must now be approved by the European Parliament and the Council.
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