The European Commission announced its new Capital Markets Union (CMU) action plan yesterday (Thursday) in the wake of president Ursula von der Leyen’s state of the union address, and the EMF-ECBC’s Luca Bertalot said the SME and green ambitions chime with the industry’s own initiatives.

The new CMU action plan is aimed at developing the EU capital markets to ease access to finance for businesses, particularly SMEs, as well as ensuring European savers have the confidence to invest for their future, according to the Commission.

“The coronavirus crisis has injected real urgency into our work to create a Capital Markets Union,” said Valdis Dombrovskis, executive vice president for an Economy that works for People. “The strength of our economic recovery will depend crucially on how well our capital markets function and whether people and businesses can access the investment opportunities and market financing they need.

“We need to generate massive investments to make the EU economy more sustainable, digital, inclusive and resilient. Today’s action plan aims to tackle head-on some of the remaining barriers to a single market for capital.”

The Commission said vibrant capital markets will also support Europe’s green and digital transition, as well helping to create a more inclusive and resilient economy, with the green and digital focus evident throughout the action plan.

The green message echoes that of Commission president von der Leyen’s state of the union address to the European Parliament on Wednesday of last week (16 September), where she focused on the European Green Deal, including kickstarting a “European renovation wave”.

“This is why we will set up a new European Bauhaus,” she said, “a co-creation space where architects, artists, students, engineers, designers work together to make that happen.”

Responding to the CMU action plan, Luca Bertalot, secretary general of the European Mortgage Federation-European Covered Bond Council (EMF-ECBC) took up the president’s green theme.

“As a long time supporter of the Capital Markets Union project, we welcome today’s publication of the CMU action plan and especially its sharpened focus on ensuring that the recovery will be green,” he said. “This is reflected in our own work at present to build a green Bauhaus system in Europe with multisector synergies for consumers, lenders and investors via the Energy Efficient Mortgage Label.

“This is part of the wider objectives of the Energy Efficient Mortgages Initiative (EEMI), which seeks to be a socio-economic driver for the Green Deal and, as such, a fully functional CMU will help realise the move towards a transition economy.”

The EMF-ECBC and its partners are pressing ahead with the EEMI, and yesterday announced Helaba as the latest EeMAP pilot bank, with further institutions expected to be confirmed in the coming days, which Bertalot said signals the burgeoning support for the initiative.

He also noted the mention of European Secured Notes (ESNs) in the action plan, citing their potential in respect of the SME and ESG goals of the Commission. ESNs were included in a footnote to action six of the new CMU plan, focused on how capital markets can help banks grow their capacity to lend to the economy.

The main focus of the action is the potential for securitisation to do this, and thereby also help in the green transition: “In order to scale-up the securitisation market in the EU, the Commission will review the current regulatory framework for securitisation to enhance banks’ credit provision to EU companies, in particular SMEs.”

The footnote says the Commission “will also continue to assess the possibility of introducing a dual-recourse instrument named European Secured Notes”, noting that under a provision of the covered bond directive it will submit a report to the Parliament and Council by July 2024.

Parliament’s Committee on Economic & Monetary Affairs (ECON) earlier this month called on the Commission to come forward with a legislative proposal on ESNs. The call came alongside an “own-initiative” report by ECON that is set to be voted on at a plenary sitting next month.

Photo: state of the union address; Credit: European Parliament/Daina le Lardic; Copyright EU