The European Commission recently announced the start of the program for the creation of a so-called Capital Markets Union (the "CMU")1 with the purpose to create a single capital market for all 28 European Member States.

The CMU shall allow an effective diversification of the sources of funding across Europe and a reduction of the cost of capital. In this regard, the diversification of sources of funds mainly aims at business angels and crowdfunding so that not only entrepreneurs and investors will benefit from the CMU, but savers as well.

In order to fulfil these objectives, the European Commission has identified the following targets:

  • the fragmentation of the European financial market,
  • the heavy reliance on banks for the raising of capital,
  • the tax bias on equity compared to the tax advantages on debts, and
  • the unlevelled levels of information provided on small businesses.

These issues shall be addressed by passing a regulatory solution on the European level that takes into account not only the adoption of new rules, but also the assessment of regulations globally given for financial services.

In order to "identify the barriers that are stopping capital from flowing and work out how to knock them down one by one"2, the European Commission has thus decided the publication of a Green Paper3 regrouping the results of a wide public consultation which, amongst others, included the following topics:

  • the possibility of creating a single super-regulator for capital markets in the European Union (such proposal being currently far from obtaining all the Member States' consent),
  • the adoption of single accounting standards,
  • the harmonisation of covered bonds, securitisation and private placement regimes, and
  • the streamlining of the requirements in the prospectus directive4 on companies raising capital.

The Green Paper will be published in the course of February.

Following the results of such public consultation, the European Commission will establish an action plan later in 2015, detailing how it concretely intends to achieve its goals. Commissioner Mr. Jonathan Hill, during a speech back in November 2014, explained that such action plan will be his "roadmap to developing an ambitious Capital Markets Union".

The adoption of the CMU, being part of the Political Guidelines presented by President Mr. Jean-Claude Juncker to the European Parliament last summer, is planned for 2019.



2. Commissioner Mr. Jonathan Hill.

3. Tentative government report and consultation document of policy proposals for debate and discussion without any commitment to action.

4. Directive 2003/71/EC of the European Parliament and of the Council of 4 November 2003 on the prospectus to be published when securities are offered to the public or admitted to trading and amending Directive 2001/34/EC.

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