March 12, 2018

EC presented a new package of proposals, toward the development of Capital Markets Union, to promote the EU market for covered bonds as a source of long-term finance, boost the cross-border market for investment funds, and ensure greater certainty for investors when dealing in cross-border transactions of securities and claims. This will help integrate the EU capital markets further by facilitating cross-border operations and increasing legal certainty for companies.

EC has made the following proposals:

  • European covered bonds. EC is proposing common rules—consisting of a Directive and a Regulation—for covered bonds. The proposed rules are based on high quality standards and best practices. They aim to enhance the use of covered bonds as a stable and cost-effective source of funding for credit institutions, especially where markets are less developed.
  • Cross-border distribution of investment funds. EC proposal on cross-border distribution of investment funds aims to remove the regulatory barriers for all kinds of investment funds, making cross-border distribution simpler, quicker, and cheaper. Increased competition will give investors more choice and better value, while safeguarding a high level of investor protection. 
  • Law applicable to cross-border transactions in claims and securities. The proposed regulation aims to ensure legal certainty about which national law applies when determining who owns a claim after it has been assigned in a cross-border case. This proposal clarifies according to which law such disputes are resolved: as a general rule, the law of the country where creditors have their habitual residence would apply, regardless of which member state's courts or authorities examine the case. This proposal will promote cross-border investment, access to cheaper credit, and prevent systemic risks.

Valdis Dombrovskis, the Vice-President responsible for Financial Stability, Financial Services, and Capital Markets Union, said: "Today's proposals are part of a broader strategy to strengthen capital markets and encourage investments in the EU. To have a genuine Capital Markets Union in Europe by 2019, we need to advance in three directions: European labels and passports for financial products, harmonized and simplified rules to deepen capital markets, and more consistent and efficient supervision." Quick adoption of these proposals by the European Parliament and the Council will enable businesses and investors to benefit more fully from single market opportunities. EC also calls on the co-legislators to ensure speedy adoption of pending key reforms for the completion of the Capital Markets Union. Out of the 12 proposals presented by EC to establish the building blocks of the Capital Markets Union, only three have been agreed by the co-legislators at this stage.


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Keywords: Europe, EU, Securities, Capital Markets Union, Covered Bonds, Cross Border Distribution, EC

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