Finland supports EU capital markets union but warns over big regulation agenda

By on 18/05/2015
An EU capital markets union would give companies wider access to capital across the 28-nation bloc. Photo: iStock

Finland gave support to the European Commission’s proposal of a capital markets union, which would boost economic growth by giving companies wider access to capital across the 28-nation bloc.

The EU Commission in February published a green paper – a public consultation on a possible Capital Markets Union and Finland submitted a response on Monday, 11 May.

Päivi Leino-Sandberg, senior adviser at the Financial Markets Department in the Finnish Ministry of Finance, who drafted the document on behalf of several ministries, said that “Finland takes a positive view of the development of a Capital Markets Union in the EU, which would ease cross-border access to capital for businesses, stabilise financial markets and contribute to economic growth.”

But, he warned that “new regulations should only be issued if they clearly provide added value” and that “the EU must undertake measures to enhance the ability of public authorities to obtain information from other member states.”

He told Global Government Forum: “We feel that instead of an immediate and massive regulation agenda, we should examine where the hinders for free movement of capital are and think of all possible means for addressing them.

“Finding ways to develop cooperation between authorities is one option, which we see as a possibility in several of the replies.”

Unlike in the United States, where companies rely mainly on shares or bonds to raise money for development, in Europe small and medium-sized firms go primarily to banks to borrow money and do so within national borders.

Europe’s financial services market is fragmented, making companies vulnerable to trouble in national banking systems. A capital markets union could enable a small company in one EU country either to borrow easily from a bank in another EU country or to sell securities across the EU.

But, this requires the harmonisation of various securities laws across Europe as well as insolvency and bankruptcy laws and tax and accounting standards.

Bruegel, an influential EU affairs think-tank in Brussels, proposed that the EU should first focus on a limited number of reforms to maintain momentum in building a capital markets union.

Bruegel also said that plans by 11 euro zone countries for a tax on stock, bond and derivatives trades “may act as a brake on investment, with detrimental economic consequences”. It recommended creating a new office of European Chief Accountant to stamp out national differences in how accounting rules are applied.

Company accounts are the basis of information investors use when making decisions.

About Winnie Agbonlahor

Winnie is news editor of Global Government Forum. She previously reported for Civil Service World - the trade magazine for senior UK government officials. Originally from Germany, Winnie first came to the UK in 2006 to study a BA in Journalism & Russian at the University of Sheffield. She is bilingual in English and German, and, after spending an academic year abroad in Russia and reporting for the Moscow Times, Winnie also speaks Russian fluently.

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