Yesterday I participated in a panel discussion, hosted by Bloomberg, on both the opportunities and challenges of building a European Capital Markets Union (CMU) which included a keynote speech by Olivier Guersent, Director General of DG FSMA at the European Commission.
It was a fascinating and important discussion. I think that there are two very simple messages that we need to keep in mind. The first is that the CMU project has enormous opportunities and enormous potential. The second is that there are very considerable implementation challenges.
One of the most important steps in the CMU project has been the recent Call for Evidence on the EU Regulatory Framework from the European Commission.
The Commission’s consultation closed on 31 January, and we understand that there were around 300 responses from a very wide range of stakeholders, including BNY Mellon and one of our investment management companies, Insight Investment.
BNY Mellon responded in detail and we focused on several key themes including:
Ensuring consistency with international standards
Ensuring consistency across member states and across pieces of legislation
Achieving good regulatory practice
To these three formalistic themes, we added a functional theme – the need to recognise the importance of the distinct roles of market infrastructure and of intermediaries.
Intermediaries play a critical role in allowing end users to access market infrastructure. But this is not the only role of intermediaries. From a systemic risk perspective, intermediaries serve to help ensure that risk is well-distributed throughout the financial system, so that there is no excessive concentration of risk at the centre.
For Europe to develop its capital markets, European policymakers need not only to focus on specific measures to benefit markets, but also to consider the impact of new regulations on banks’ ability to provide capital market services, and to act as intermediaries.
I previously mentioned that the diversity and complexity of CMU topics represented a major challenge to progress. To conclude, I should like to offer some suggestions as to how we can overcome this challenge.
First of all, I would stress in particular the need for public consultation and debate. The recent announcement of the creation by the European Commission of a “European Post-Trading Forum” is a very welcome development.
Technological developments, of which there are many underway, will facilitate the breakdown of barriers between markets and between countries.
But most importantly, there is simply the enormous potential of the Capital Markets Union project.
This should give us, the Commission, and the European Member States, the motivation to keep on working to achieve our goals of greater harmonisation in Europe through a Capital Markets Union.
You can learn more about the Capital Markets Union here.