A New Vision for Europe’s Capital Markets that Works for All

10.06.2020 RIG

On June 10, 2020, the European Commission’s High Level Forum (HLF) on the Capital Markets Union published the final report “A new Vision for Europe’s capital markets”, proposing clear and precise recommendations for advancing toward one single market in Europe for savings, investments and raising capital to enable dynamic companies to grow.

The HLF report notably calls for developing a more vibrant and long-term equity market, and notes this is needed more than ever for future recovery after the Covid-19 crisis. The report includes 17 recommendations grouped in four clusters: the financing of business; market infrastructure; individual investors’ engagement; and obstacles to cross-border investment.

The CEO of Nasdaq Riga and Head of Nasdaq Baltic Markets, Daiga Auziņa-Melalksne was selected as one of the 28 members of the HLF and was the only representative from the Baltics and Nordics. “I believe that the ambition set out in the HLF report on the Capital Markets Union, that it be a savings and investment union that works for all, is a great way to further European and Baltic economic prosperity,” Auziņa-Melalksne said.

In her contributions to the work of the HLF, Auziņa-Melalksne shared insights about the realities of smaller companies needing financing for growth in an environment where capital markets are still in development. Throughout the work, she liaised with other members of the HLF, and in particular, those representing the interests of issuers, to ensure that the report maintained a focus on truly realizing the opportunities to support companies on their growth journey.

“The task is ambitious and progress can be achieved only if the European Commission, the European Parliament and Council jointly commit to a bold and precise package of reforms. It is even more important that Member States commit to swiftly implementing the agreed measures and pursuing complementary measures at national level. For the Baltic governments, that means to continue to develop the local capital markets by listing SOEs on exchanges, which would create the regional ecosystem needed for SMEs to attract capital through equity and bond issues and provide opportunities for Baltic pension funds to invest domestically, also facilitating retail investment and a stock ownership culture,” Auziņa-Melalksne added.

Key highlights from the report’s recommendations

  • Support the visibility of issuers vis-à-vis investors: create a European Single Access Point (ESAP), widen the research coverage of SMEs, by allowing brokers to bundle fees for SME research, support the development of SME indices.
  • Better regulatory framework for issuers: shorter and simpler prospectuses, review the Market Abuse framework, optional transition period after IPO, affordable XBRL reporting, streamline IFRS for SMEs.
  • The already proposed EU IPO Fund should operate also for secondary capital raising.
  • Facilitate infrastructures to support cross-border transactions: review the CSD Regulation for cross-border settlement, analyse branches for exchanges.
  • Foster retail investor engagement: simpler investor protection administration for experienced retail investors, support employee stock option programs.

Overall impact and benefits

The report presents a coherent package of recommendations, which, if implemented as whole will greatly support post-COVID-19 European economic recovery.

Steps that facilitate the issuance of financial instruments by companies will also provide savers with new investment opportunities. Initiatives to encourage investor activity will also make it easier for businesses to attract investors and so diversify theirs sources of funding. That will improve companies’ resilience and also enhance corporate governance to the extent investors play an active role in control.

Meanwhile, helping saving and investment activity become more cross-border in nature will help diversify risks and foster interest in keeping Europe’s borders open.

Taken together, the measures, which are proposed, will lead to national capital markets that are better integrated, that are larger, more efficient, and better positioned for the future.

The full HLF final report is available HERE

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Dace Bulte,
+371 6721 2431

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