EU readies next steps to boost its capital market

LONDON – The European Union will propose rules next month to make it easier for companies to list, give creditors more predictability on company bankruptcies, and to attract more euro derivatives clearing from London, the bloc’s financial services chief said on Thursday.

Mairead McGuinness said there had been good progress in building the EU’s capital markets union (CMU) but more needed to be done to ease reliance on banks for funding companies and the economy, and on London post-Brexit for clearing euro denominated swaps.

“We are still over-reliant on central counterparties outside the European Union and this is also a matter of financial stability,” McGuinness told an event held by the Association for Financial Markets in Europe (AFME).

“In the unlikely case of something going wrong, we would not be in the driving seat for decisions, so we want to increase the attractiveness of clearing in the EU,” she said.

McGuinness said next year she would propose streamlining the system of withholding tax on investments that investors have outside their home state in the bloc.

The EU is watching closely steps being taken by Britain to bolster the competitiveness of its financial sector, now largely cut off from the bloc.

“When the UK were part of the European Union we had a very strong financial center, but that has changed and the focus of our work is changing because of that,” McGuinness said.

“We realize that for the size of our economy the capital markets don’t reflect that, as we rely very heavily on bank finance and that is not appropriate.”

AFME was publishing a report on progress with the CMU, which showed Europe is falling further behind the United States in terms of building a deep pool of capital for investors, despite many legislative measures in the EU in recent years.

“It is still early days for CMU. The CMU will not be built overnight,” McGuinness said.