Public funding of failing banks in the European Union (LBF vol. 19) 2020/1.4.2:1.4.2 Proposal for a Capital Markets Union

Public funding of failing banks in the European Union (LBF vol. 19) 2020/1.4.2

1.4.2 Proposal for a Capital Markets Union

Documentgegevens:

mr. M. Louisse-Read, datum 01-06-2020

Datum: 01-06-2020
Auteur: mr. M. Louisse-Read
JCDI: JCDI:ADS214056:1
Vakgebied(en): Financieel recht / Europees financieel recht
Staatssteun (V)

In September 2015, the Commission adopted an action plan setting out a list of over 30 actions and related measures to establish the building blocks of an integrated Capital Markets Union (CMU) in the EU by 2019.1 The CMU has to ensure more diversified sources of finance so that companies, including SMEs, can tap capital markets and access other sources of non-bank finance in addition to bank credit. At the same time, the idea is that a well-functioning CMU strengthens cross-border risk-sharing through deepening integration of bond and equity markets.2 Together with the European Banking Union, the CMU promotes a stable and integrated financial system in the EMU.

The introduction of the CMU also has an impact on banks, since they play a central role in the CMU as lenders to a significant proportion of the economy and intermediaries in capital markets. The Commission expects that bank lending will continue to be the main source of funding for many businesses alongside capital markets.3 One of the goals of the CMU is there fore to strengthen the banking capacity to support the wider economy. The actions taken in relation to this objective are the initiatives to:

–: explore the possibility for all Member States to benefit from local credit unions to operate outside the scope of the EU's capital require ments rules for banks;4
–: revitalise simple, transparent and standardised European securitisations to free up capacity on banks' balance sheets and provide access to investment opportunities for long term investors;5
–: build a pan-European covered bond framework, building on nation al regimes that work well, and explore the feasibility of similar funding tools for SME loans (European Secured Notes);6 and
–: develop a secondary market for NPLs.7

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EC, Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions – Action Plan on Building a Capital Markets Union, COM(2015) 468 final. In June 2017, the Commission published a mid-term review of the CMU action plan (EC, Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions on the Mid-Term Review of the Capital Markets Union Action Plan, COM(2017) 292 final). In November 2018, the Commission published a report on the progress achieved (EC, Communication from the Commission on the Capital Markets Union: time for renewed efforts to deliver for investment, growth and a stronger role of the euro, COM(2018) 767 final).

Five Presidents’ Report, p. 12.

As part of the Banking Package, the Commission proposed an amendment to the EU’s capital requirement rules for banks, empowering it to exempt the entire credit union sector of a Member State. CRD V provides for such exemption.

Regulation (EU) 2017/2402 lays down a general framework for securitisation and creating a specific framework for simple, transparent and standardised securitisation. The regulation applies from 1 January 2019. In addition, the Commission adopted a delegated regulation amending Delegated Regulation (EU) 2015/35 as regards the calculation of regulatory capital requirements for securitisations and simple, transparent and standardised securitisations held by insurance and reinsurance undertakings on 6 June 2019. At the time of writing this dissertation, this delegated regulation has not yet entered into force.

EC, Proposal for a Regulation of the European Parliament and of the Council on amending Regulation (EU) No 575/2013 as regards exposures in the form of covered bonds, COM(2018)93 final. The regulation amends CRR with the aim of strengthening the conditions for granting preferential capital treatment, by adding further requirements. EC, Proposal for a Directive of the European Parliament and of the Council on the issue of covered bonds and covered bond public supervision and amending Directive 2009/65/EC and Directive 2014/59/EU, COM(2018)94 final. The directive introduces a common definition to receive an EU covered bond label. See also EBA, Report on the European Secured Notes (ESNS), 24 July 2018. On 27 February 2019, the Council and the European Parliament reached a provisional agreement on the proposals. At the time of writing this dissertation, the proposals have not yet been adopted.

This development has been discussed in section 1.4.1.4.