EC Publishes Paper on Development of Private Placement of Debt in EU
EC published report on a study on identifying market and regulatory obstacles to the development of private placement of debt in the EU. The study shows that private placement of debt instruments with institutional investors could play a greater role in financing medium-size companies in the future. The study also highlights a considerable growth potential for private placements in the EU due to new domestic markets and increased cross-border activities.
The paper comprises two parts: an economic part and a legal part. The economic part contains five sections involving stock-taking of existing and well-functioning private placement markets, cost-benefit analysis of private placements vs. other financing instruments, assessment of growth potential of private placement markets in Europe, risk analytics of private placements, and mapping of innovation in the private placement sector. The legal part contains three sections that cover analysis of regulatory best practice in well-functioning private placement markets, identification and analysis of regulatory obstacles to the development of private placement markets across the EU, and analysis of most common risk-mitigation clauses in private placement transactions.
In line with the Capital Markets Union Action Plan, the study identifies best practices in the well-functioning EU markets of private placements (mainly the German Schuldschein and the French EuroPP) as well as potential barriers to their development. The study shows that private placements allow investors to diversify their investment portfolio to unrated, private firms while earning an attractive return. Moreover, the risk profile of private placement instruments is not substantially different from senior unsecured debt. No major regulatory barriers preventing further growth of private placements in the EU have been identified as requiring immediate attention. However, some steps could be taken at the European and national levels to foster the development of private placement markets.
Related Link: Press Release
Keywords: Europe, EU, Securities, Private Placements, Debt Instruments, EC
Related Articles
BIS and Central Banks Experiment with GenAI to Assess Climate Risks
A recent report from the Bank for International Settlements (BIS) Innovation Hub details Project Gaia, a collaboration between the BIS Innovation Hub Eurosystem Center and certain central banks in Europe
Nearly 25% G-SIBs Commit to Adopting TNFD Nature-Related Disclosures
Nature-related risks are increasing in severity and frequency, affecting businesses, capital providers, financial systems, and economies.
Singapore to Mandate Climate Disclosures from FY2025
Singapore recently took a significant step toward turning climate ambition into action, with the introduction of mandatory climate-related disclosures for listed and large non-listed companies
SEC Finalizes Climate-Related Disclosures Rule
The U.S. Securities and Exchange Commission (SEC) has finalized the long-awaited rule that mandates climate-related disclosures for domestic and foreign publicly listed companies in the U.S.
EBA Proposes Standards Related to Standardized Credit Risk Approach
The European Banking Authority (EBA) has been taking significant steps toward implementing the Basel III framework and strengthening the regulatory framework for credit institutions in the EU
US Regulators Release Stress Test Scenarios for Banks
The U.S. regulators recently released baseline and severely adverse scenarios, along with other details, for stress testing the banks in 2024. The relevant U.S. banking regulators are the Federal Reserve Bank (FED), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).
Asian Governments Aim for Interoperability in AI Governance Frameworks
The regulatory landscape for artificial intelligence (AI), including the generative kind, is evolving rapidly, with governments and regulators aiming to address the challenges and opportunities presented by this transformative technology.
EBA Proposes Operational Risk Standards Under Final Basel III Package
The European Union (EU) has been working on the final elements of Basel III standards, with endorsement of the Banking Package and the publication of the European Banking Authority (EBA) roadmap on Basel III implementation in December 2023.
EFRAG Proposes XBRL Taxonomy and Standard for Listed SMEs Under ESRS
The European Financial Reporting Advisory Group (EFRAG), which plays a crucial role in shaping corporate reporting standards in European Union (EU), is seeking comments, until May 21, 2024, on the Exposure Draft ESRS for listed SMEs.
ECB to Expand Climate Change Work in 2024-2025
Banking regulators worldwide are increasingly focusing on addressing, monitoring, and supervising the institutions' exposure to climate and environmental risks.