Work towards capital markets union (CMU) in Europe will proceed, despite the resignation of the project’s spearhead Lord Jonathan Hill, his replacement has confirmed.
In written answers to his first interrogation by the Committee on Economic and Monetary Affairs (ECON), Valdis Dombrovskis – former prime minister of Latvia and now EU financial services commissioner – said that he would sustain the broad objectives set on Hill’s watch, namely:
On regulatory and supervisory matters related to CMU, Dombrovskis told ECON: “I remain committed to the approach expressed in the CMU Action Plan that, as a priority, we support the European supervisory authorities [ESAs] to deliver even better on their existing mandates.”
He explained: “I believe that it is important to make further progress on European supervisory convergence, particularly as regards the European Securities and Markets Authority [ESMA].
“I will encourage ESMA to further use its existing powers to strengthen supervisory convergence and identify areas where a more integrated approach would improve the functioning of the single market for capital.”
Further to those moves towards a single watchdog for Europe’s capital markets, Dombrovskis also signalled aims to tackle the continent’s patchwork of rules on corporate bankruptcy.
“Diverging and ineffective insolvency regimes are a long-standing barrier to cross-border investment,” he stressed. “Differences in insolvency frameworks are a major source of uncertainty and unpredictability.
“I will work towards clear and effective approaches to debt restructuring in all member states, which can save economically viable companies in temporary financial distress.”
He added: “Improved debt-restructuring rules can also help creditors of non-viable businesses, by providing more transparency about the situation and the likelihood of recovering some value.”
Dombrovskis said he would support current European Commission research to benchmark national corporate-insolvency regimes on the basis of outcomes, to pinpoint an exemplar for a more harmonised, regional system.
Turning to business taxation, he noted that corporate tax systems’ bias towards debt financing can disincentivise the more capital markets-based funding method of equity financing.
“The Commission intends to tackle this matter in [its] proposal on a Common Consolidated Corporate Tax Base, which we intend to adopt this autumn,” he said.
Dombrovskis’ predecessor, Lord Hill, quit his role as the UK’s European commissioner following the Leave victory in the recent EU Referendum. Hill judged that the outcome made his position in Brussels untenable.