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The EU speed up its plans for establishing capital markets union

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The European Union (EU) is accelerates its plans to create a more integrated and cheaper capital market next year, when the community will face the Brexit. The European Commission (EC) today unveiled its plans to build a Capital markets union with the establishment of alternative sources of funding and the removal of barriers to cross-border investment. It must bring benefits to all EU countries and significantly strengthen economic and monetary union.
The expectations are to promote cross-border investment fund markets, to promote the EU bond market as a source of long-term funding, and to provide greater security for investors in cross-border securities and debt transactions. The main task of the Capital markets union is to target capital to all EU businesses.
These proposals would enable companies and investors to use of the opportunities of the single market.
“In order to have a true union of capital markets by 2019, we need to make progress in three directions – European labels and passports for financial products, harmonized and simplified rules for deepening capital markets and more consistent and effective supervision”, said the EC Vice President, Valdis Dombrovskis.
The Commission proposes common rules – a directive and a regulation on covered bonds. Their total value of 2.1 trillion EUR currently ranks among the largest debt markets in the EU. The European banks are at the forefront of this market, which is an important source of long-term funding for many EU countries.
The covered bonds are financial instruments backed by a separate group of loans. Their advantage is that they finance cost-efficient lending and are a secure asset.
Since the EU market is fragmented on a national basis and there are differences between countries, the proposed rules are based on certain standards. Their purpose is to use covered bonds as a source of funding for credit institutions to facilitate, especially where markets are underdeveloped. For investors, they will provide a wider and more secure choice of investment opportunities.
The other objective of the proposal is to reduce the cost of borrowing for the economy. The EC assessments indicate that the possible total annual savings for EU borrowers would be between 1.5 and 1.9 billion EUR.
One of the EC’s tasks is to remove the barriers that hinder the cross-border supply of investment funds so that it becomes simpler, quicker and cheaper. The enhanced competition will lead to more choice and more advantageous proposals without compromising the high level of investor protection.
The EU investment fund market amounted to a total of 14.3 trillion EUR.
The European Commission also announced measures to clarify the legal settlement of inter-state disputes concerning debt claims as well as the ownership of securities when there is more than one party.
The Member States and the European Parliament will have the final say on the proposals, and it is possible to make changes.