Ireland and Nordic-Baltic states press urgency of capital markets plan

Paper outlines how a looming Brexit ‘must act as a catalyst to redouble our efforts’

European Union  flags fly outside the Europa building, the seat of the European Council and Council of the European Union, in Brussels, on Monday. Photograph: Yuriko Nakao/Bloomberg

European Union flags fly outside the Europa building, the seat of the European Council and Council of the European Union, in Brussels, on Monday. Photograph: Yuriko Nakao/Bloomberg

 

Ireland has come together with the Nordic-Baltic states to urge European Union countries to redouble their efforts to create a more unified and cheaper capital market by next year as European elections and Brexit loom.

In a paper to be published today, Minister for Finance Paschal Donohoe, together with counterparts from Denmark, Estonia, Finland, Latvia, Lithuania, Sweden and the Netherlands, will say that with European Parliament elections due to take place next May, “time is not on our side and so we must set an ambitious target and prioritise” to deliver a capital markets union (CMU).

“The United Kingdom’s decision to leave the European Union, while regrettable, must act as a catalyst to redouble our efforts in further developing and integrating EU capital markets,” the ministers will say.

With almost 80 per cent of funding for European small and medium-sized enterprises (SMEs) coming from banks, the European Commission has been pressing for the past four years for the need of a capital markets union to make it easier for companies to raise funding in an integrated capital market. By contrast, about 80 per cent of funding for US SMEs is raised in financial markets.

Signed up

“Notwithstanding the complexities of many CMU action points, we are committed to working constructively within the [European] Council and with the parliament and the commission in order to help ensure the priority issues are delivered within the current term,” the paper will say.

Ireland and the other seven countries that have signed up to the paper have said that EU member states must focus on aspects of the commission’s CMU action plan which will have the largest impact and enjoy broad support.

Covered bonds

“This includes the Investment Firms Review which will implement a more proportionate regulatory regime for investment firms and the proposed framework for covered bonds, which would enhance their use as a stable and cost-effective source of funding for credit institutions to help finance the real economy,” the paper says.

“In addition, proposals that help provide financing to European companies that actively contribute to a low carbon and environmentally resilient economy and sustainable development must also be advanced.”