Finland Chamber of Commerce agrees with the conclusions of the Letta and Draghi reports regarding the need to develop the functioning EU capital markets. The EU needs better functioning and more integrated capital markets to finance sustainable transition, digital transition and investment needs relating to defence and security.
In our view, the Savings and Investments Union (SIU) should primarily be based on market-led solutions (bottom-up approach). However, certain targeted regulatory changes are needed to support this. Moreover, we note that the SIU cannot succeed without a competitive and attractive business environment. Thus, the objectives of the SIU are closely linked to the general objectives of the Competitiveness Compass.
We note that the previous Capital Markets Union Action Plans have included dozens of legislative initiatives. While these initiatives have often been necessary, the vast amount of legislative changes and the complexity of the legislative framework (e.g. overly detailed legislation, divergences in interpretation of legislation, huge amount of Level 2 legislation) have increased compliance costs and added entry barriers for new market participants.
A deep and well-functioning SIU cannot be achieved overnight. We encourage the Commission to prioritise and to focus on those initiatives that truly make a difference. At the same time, there is a need to add pressure for Member States to develop capital markets at national and regional level. We also encourage the Commission to explore ways to support national initiatives while recognising that the initiatives need to be tailored to the specific features of each Member State.
Finland Chamber of Commerce has the following proposals relating to the SIU:
I. Reduce administrative burden of issuers and investment firms
- Abandon the so-called ESEF requirement to mark-up financial statements and sustainability reports with machine readable tagging. ESEF requirements create a lot of manual work for issuers. Still, there seems to be minimal market demand for such tagged files. Moreover, the development of AI applications will likely make ESEF tagging redundant within the next few years.
- Increase investment firms’ incentives to offer simple investment products (as defined by MiFID: listed shares, UCITS etc.). Reduce and simplify the procedures, reporting, and disclosure obligations relating to these products.
II. Facilitate the channelling of capital to investments
- Reassess the regulation relating to private equity funds. As highlighted in the Draghi report, the EU needs to scale up venture capital funding. In order to facilitate this, the AIFMD and EuVECA regulation should be reassessed. In order to encourage development of truly European venture capital funds, centralisation of their supervision to ESMA level should also be considered.
- Ensure that sustainable finance framework facilitates channelling of capital to investments that facilitate transition to sustainable business models.
- Review the securitisation framework to boost securitisation.
- Promote pension models that rely more on funding rather than pay-as-you-go.
III. Make targeted changes to the supervisory structure.
- Facilitate a ”European passport for interpretations”: Interpretations of EU legislation and practices adopted in one EU Member State should be accepted as such in other Member States. For example, the model of “Accepted Market Practices” set out in Article 13 or the Market Abuse Regulation could be extended to any interpretation of EU legislation.
- Commit to the long-term objective of gradually centralising all data reporting to ESMA level. In the long term, it does not make sense to maintain 27 national IT systems for data reporting plus ESMA level IT system for exchange of information. Centralisation of data reporting would also ease the reporting burden of market participants operating in several Member States. Centralisation of data reporting should always be considered when significant changes to data reporting requirements are introduced.
- Transfer supervision of trading venues and CSDs from NCAs to ESMA.
IV. Add incentives for households’ participation in the capital markets
- Establish a framework for an EU-wide Investment Savings Account. The framework could be based on the model of the Swedish ISK. The framework should allow for the transfer of an account from one service provider to another within the EU. The main features of the tax treatment of the account should also be harmonised so that a change of tax residence within the EU would not trigger all tax consequences.
- Continue supporting national financial literacy initiatives.
