On 23 March, the European Economic and Social Committee adopted two opinions on the Commission's latest proposals to further develop the EU's Capital Markets Union: a new Listing Act and a review of the European Market Infrastructure Regulation (EMIR). Regarding the Listing Act, the Committee recommends that the full listing documentation be published in the national languages to empower local retail investors and help the development of a national retail investment base. On EMIR, a clearer stance on reducing exposure to UK central counterparties (CCPs) had been expected, as well as more specific rules and incentives to drive the move towards EU-based CCPs after Brexit.
In December 2022, the European Commission published a set of measures to further develop the EU's Capital Markets Union (CMU), which remains fragmented and underdeveloped in size. Part of the package – a new Listing Act – aims to reduce the administrative burden of the listing process for companies of all sizes, particularly SMEs, so that they can better access funding by listing on European public markets. Studies indeed show a sub-optimal situation with respect to SME initial public offerings (IPOs) in Europe, as the total number of listed companies on SME growth markets in the EU has barely increased since 2014.
The EESC welcomes the Listing Act proposed by the Commission, as increased equity funding (the process of raising capital through the sale of shares) and thereby less dependence on bank loans for European companies is key to ensuring the post-pandemic recovery and to building a resilient economic system.
The Committee believes that bringing more family-owned companies to capital markets would open up untapped potential to attract capital for growth. EESC rapporteur Kęstutis Kupšys explains that
In this context, a multiple-voting rights regime helps families to retain control, making listing more attractive to them. It is also important to streamline the contents of a prospectus to significantly reduce the costs and burden for issuers. However, the EESC thinks that using "English-only" issuance documents, as per the Commission's proposal, would hinder the development of a national retail investment base.
The EESC is of the opinion that the publication of a full-scale document, and not only its summary, in national languages, would empower local retail investors.
In addition to a new Listing Act, the Commission has proposed a new European Market Infrastructure Regulation (EMIR) to enhance the clearing capacity within the EU. A safe, robust and competitive clearing ecosystem is an essential part of a well-functioning Capital Markets Union. But this is not the case yet, and European financial markets are put at risk by overdependence on services provided by third-country Central Counterparties (CCPs), especially in the UK. CCPs are highly regulated financial entities that help facilitate the clearing and settlement process in financial markets. While they have traditionally served one market in one country, CCPs have more recently expanded to serve multiple markets across national borders.
EESC rapporteur Florian Marin on the Commission's proposal:
We are reviewing EMIR but there is not a clear plan containing specific measures to create a competitive and consolidated clearing market. We regret that the current framework has not been assessed after five years, and propose that the European Securities and Markets Authority (ESMA) issue a report on the reasons for the use of non-EU CCPs one year after the Regulation enters into force.
The EESC says it had expected a clearer stance from the Commission on reducing exposure to UK CCPs, and more specific rules and incentives to drive the move towards EU-based CCPs immediately after Brexit.
In addition to that, the Commission needs to clarify the exact meaning of the word "urgently" in the proposed changes to Article 20 of the current EMIR, and co-legislators need to agree and specify which exemptions fall under the "urgent" decision.
Also, alongside financial risk, the risk models must account for the social, governance and environmental risks of CCPs. These should be equally important within different risk scenarios and analyses.
In its opinion on the EMIR, the Committee also suggests that the EU CCPs must be transparent about their fees, margin calls and actions during periods of market stress, in order to improve predictability for all market participants.
Finally, the EESC supports the proposed modifications to Article 23 regarding the creation of joint oversight teams and the Joint Monitoring Mechanism. The Committee proposes that civil society be involved in the monitoring mechanism established under Article 23(c) and that the EESC be part of the Joint Monitoring Mechanism as an observer.