Today, the EU Commission’s high-level expert group published its final report with recommendations for the further development of the European Capital Markets Union. The group consisting of experts from authorities, the financial businesses and a few consumer and investor protection groups was set up after the Capital Markets Union project had made little progress in recent years. Various guidelines and regulations have been adopted, but the major obstacles to capital market integration have not been removed.
MEP Sven Giegold, financial and economic policy spokesperson of the Greens/EFA group commented:
“The expert report has not been a major coup. The method of developing a large European blueprint by a broad group of experts has reached its limits in the Capital Markets Union. In contrast to the group of experts in sustainable finance, no convincing picture emerged that combines European ideals with economic interests. The group of experts does not derive the role of the capital market from a social market economy. It remains a secret of the expert group in which sectors of the economy we want which types of capital market players. However, the Capital Markets Union will only be accepted if the capital market is democratically and socially embedded. Strong European capital markets also need clear boundaries. For example: Real estate and land should not be in the hands of financial investors who strive for short-term profits and tax deals. The expert group missed the opportunity to draft a continental European vision for the capital market after Brexit.
The report features multiple collections of industry wishes without clear European added value. However, there is no consistent vision for a European capital market. Likewise, the report does not develop an idea of how to distribute cost efficient and profitable capital market products to all investors. Europe needs long-term oriented institutional investors that strengthen European industry instead of concentrating more and more capital in index funds that are not controlled in the EU. It is also completely unclear how a mixture of competition, information efficiency and regulation should contain excessive salaries and profit claims in capital market players.
In its report, the expert group identifies important challenges such as bad advice when investing money and great reluctance of savers to invest in capital markets. The recommendations, however, are too cautious and sometimes contradictory: the formula compromise of only examining the problematic commission based advice falls too short. Customers should be offered the best products for their needs, not the most lucrative product for the consultant. Financial education will never strengthen savers’ confidence in capital market investments when people have a justified fear of bad advice. Investment opportunities in excellent financial products must be available also to those who do not want to or cannot become financial experts.
The experts’ disagreement on European supervision is disappointing. The previous patchwork is a central reason for the fragmentation of the European capital market. Too many members of the expert group obviously did not want to risk their respective small national special rules. The inefficiency of European financial supervision has been shown often enough in financial crime and consumer protection scandals. We finally need strong European capital market supervisors with independent decision-making structures and direct supervisory powers. Without any real progress in the joint supervision, the other recommendations of the expert group remain piecemeal.”
Link to the report: https://ec.europa.eu/info/files/200610-cmu-high-level-forum-final-report_en
P.S.: You are cordially invited to the international webinar “The Virus of Financial Deregulation”, which will take place today, Wednesday at 6pm. With experts and NGOs we will discuss current attempts to turn back the European financial market regulation in the shadow of the Corona crisis. Register here.