February 26, 2015
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A Buttonwood Tree Sprouts in Europe:
What the EU’s Proposed Capital Markets Union
Means for You
By: Daniel F. C. Crowley, Bart Gordon, Ignasi Guardans, Sean P. Donovan-Smith, Dr. Christian
Büche, Mélanie Bruneau, Andrés Gil
On Wednesday, February 18, the European Commission (“EC”) launched its ambitious
“Green Paper” consultation for the creation and completion of a European Union (“EU”)-wide
Capital Markets Union (“CMU”). The release of the Green Paper has now kick-started a
debate on possible measures to create a genuine EU-wide single market for capital, with the
goal of eventually emulating the depth and breadth of the U.S. capital markets. Lord
Jonathan Hill, Commissioner for Financial Stability, Financial Services and Capital Markets
Union, is spearheading the effort, calling Europe’s overreliance on bank capital and
underdeveloped capital markets a key setback towards a European economic recovery, and
even a potential systemic risk. In Lord Hill’s words, the CMU is a “prize worth fighting for.”
The Green Paper asks for feedback on measures that could unlock investment in Europe’s
companies and infrastructures over the next four years. Consequently, the CMU touches on
almost every element of the capital markets, such as harmonizing and simplifying access to
public capital markets, improving cross-border investment activity, developing a single retail
market for financial products, and creating a single rulebook for capital markets
intermediaries and infrastructures.
Key short-term priorities include reviewing the current prospectus regime for securities
offerings; creating a common minimum set of comparable information for credit reporting for
small- and medium-sized enterprises; creating a simple, transparent, and good quality
securitization market; developing a pan-European private placement market, building upon
common market practices throughout the EU; and boosting long-term investment through
European Long-Term Investment Funds.
More broadly, the CMU also addresses whether differences in insolvency frameworks and
tax regimes in Member States affect the development of a CMU. These questions will be
incredibly difficult to resolve, as EU Member States will not easily cede their jurisdiction on
issues of such national importance.
The comment period for the Green Paper will be open until May 13, 2015. The EC will also
hold a public roundtable discussion for additional feedback this summer, followed by the
release of a CMU “Action Plan.” Legislative proposals to implement the CMU are expected
to be released soon thereafter.
Stakeholders—public and private companies, financial services providers, and others—are
encouraged to carefully review the Green Paper and submit comments. In addition to
reshaping Europe’s capital markets, the EU’s proposals will have no doubt have an effect on
regulatory regimes in other countries, like the United States, or at the international level,
including the Basel Committee, IOSCO, and the IAIS. Moreover, the CMU debate will
A Buttonwood Tree Sprouts in Europe:
What the EU’s Proposed Capital Markets Union Means for You
highlight the relative merits of transparency versus prudential regulation. A global financial
services strategy will be key for effectively competing in this new global paradigm.
Authors:
Daniel F. C. Crowley
dan.crowley@klgates.com
+1.202.778.9447
Bart Gordon
bart.gordon@klgates.com
+1.202.778.9073
Ignasi Guardans
ignasi.guardans@klgates.com
+32.(0)2.336.1949
Sean P. Donovan-Smith
sean.donovan-smith@klgates.com
+44.(0)20.7360.8202
Dr. Christian Büche
christian.bueche@klgates.com
+49.(0)69.945.196.365
Mélanie Bruneau
melanie.bruneau@klgates.com
Brussels:+32.(0)2.336.1904
Paris:+33.(0)1.58.44.15.00
Andrés Gil
andres.gil@klgates.com
+1.202.778.9226
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A Buttonwood Tree Sprouts in Europe:
What the EU’s Proposed Capital Markets Union Means for You
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