The new European Commission's €315bn investment plan has to "be more than a one-off", said Jonathan Hill, the European Commissioner for financial stability, financial services and capital markets union, at a conference in Frankfurt yesterday.
"If we want to have a durable impact on economic conditions in Europe, we need to remove obstacles currently standing between companies or projects and the financing they need. And to increase the range of options available to investors so that Europe's savings, pension contributions and investment premiums can be put to more productive use. This is what we want to achieve with the Capital Markets Union (CMU)." (IAR, 2 February 2015, Commission sets capital markets union in motion).
At present the capital market remains fragmented, largely along national lines, so the goal with the CMU is to make Europe more attractive to inward investment, to create more financing opportunities for SMEs and infrastructure projects and to increase competition, said Hill, who stressed the CMU "is about complementing the role of banks, not about displacing them."
He wants to get the market for securitisation going again in Europe, saying it "will make a real difference by broadening the investor base to include more long-term investors such as insurers and asset managers."
The aim is to set up a framework for the development of an EU market that singles out a category of highly transparent, simple and standardised products.
He noted that insurance companies were given a number of incentives to invest for the long term in the detailed rules introduced for Solvency II last October. "We could also step up efforts to create a single market for personal pensions which would help mobilise more personal pension savings for long-term financing," he added.
Hill also singled out private placements as having the potential to offer investment opportunities to long-term investors, and praised the formation last year of the Pan-European Private Placement Working Group (PEPP WG), which includes insurance associations and individual insurance groups.
Hill said European Long Term Investment Funds (Eltifs) provide an ideal vehicle to provide investment incentives for the new European Fund for Strategic Investment and for insurers. "The European Parliament agreed to Eltifs recently and I want to see Eltifs up and running as soon as possible," he emphasised.
He added that the work of the task force on the EU investment plan "will help increase the transparency of infrastructure projects, which should make it easier for investors to identify strong projects in which to invest."
The Commission's intention is to make amendments to the detailed rules on Solvency II in both these areas, according to Hill, "that is, to make provision for Eltifs, and to give insurers more ways of getting involved in infrastructure projects."
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