Invest Week 28 November - 2 December 2016: Daily round up for 29 November
The second day of Invest Week on 29 November included 5 events:
The future of the Capital Markets Union, a dinner debate hosted by Insurance Europe, the European insurance federation
Will the Prospectus Regulation work for smaller companies? a debate co-hosted by the Association for Financial Markets in Europe (AFME), EuropeanIssuers, the Federation of European Accountants (FEE) and the Federation of European Securities Exchanges (FESE)
The role of the City as a global financial centre for Europe, an event hosted by the City of London Corporation
The Case for Investing in Europe, a debate hosted by Invest Europe and AmCham EU
A ministerial visit by Gavin St. Pier, Chief Minister of Guernsey, and Ian Gorst, Chief Minister of Jersey and drinks reception hosted by CIBO (Channel Islands Brussels Office)
Where to next for the Capital Markets Union?
Future steps in the Capital Markets Union (CMU) initiative were debated by representatives of the European Parliament, Commission and the insurance industry at a private dinner in Brussels. It followed publication of the results of the EC’s Call for Evidence on the EU regulatory framework for financial services on 23 November. CMU aims to create a European single market for capital by 2019.
Miguel Gil-Tertre: One of the Commission’s biggest achievements is to put investment at the centre of policy discussions.
Niall Bohan: The overarching aim is to stimulate investment in productive capital — still below pre-crisis levels — fostering the supply of infrastructure projects and addressing regulatory barriers.
Burkhard Balz: The EC’s plans are helpful but not as promising as hoped. Given current low interest rates and political and economic uncertainty, this piecemeal approach will not deliver growth.
Insurance industry: Insurers are still being regulated as though they are traders not long-term investors. The treatment of all long-term assets should be reviewed.
The Commission stressed that the concept of sustainable finance is at the core of the EU Investment Plan. Good investment projects are those that generate maximum public value and are completed on budget and on time, not ‘bridges to nowhere’. The Commission recognised the insurance industry as the biggest institutional investor, with assets of almost €10 trillion, and noted that it is important to understand what has driven the significant reduction in investment in equities. The Commission is preparing for a CMU review in 2017.
MEP Balz urged the Commission to be more ambitious in its efforts to ensure that insurers can maintain long-term investments. He argued that while the CMU cannot be a stand-alone guarantee of success, the opportunity is still there — and should be taken — to address the shortfall in economic growth. He was particularly forthright in his rejection of any attempt to now change the ultimate forward rate (UFR) calculation in the Solvency II regulatory regime, which would affect insurers’ investment strategies.
The insurance industry welcomed the Commission’s work on infrastructure project finance, which has aligned Solvency II more closely with the industry’s real risks. However, insurers stressed that infrastructure investment is only a tiny portion of their portfolios and that — to support growth — more action is needed on other asset classes.
The supply of suitable infrastructure projects has improved but there are still not enough. There are the risks that governments change their views during the course of projects and that private funding is crowded out by public banks. The industry also expressed disappointment that the EC has not addressed the negative consequences for consumers of the overload and duplication of contractual information created by various pieces of legislation.
‘The future of the Capital Markets Union’ dinner debate
hosted by Insurance Europe, the European insurance federation,
on Monday, 28 November 2016
Michaela Koller, Director General, Insurance Europe
Burkhard Balz, Member of the European Parliament, Group of the European People’s Party (DE)
Niall Bohan, Head of Unit, Capital Markets Union, Directorate-General for Financial Stability, Financial Services and Capital Markets Union (DG FISMA), European Commission
Miguel Gil-Tertre, Member of Cabinet of European Commission Vice-President Jyrki Katainen, Commissioner for Jobs, Growth, Investment and Competitiveness
Hopes and fears expressed about latest revision of EU prospectus rules
Proposed by the European Commission in November 2015, the Prospectus Regulation aims to alleviate the burden for companies while providing meaningful information for investors. Many of the policymakers and industry representatives at the Invest Week debate expressed frustration with the dilution of ambitious initial objectives in the first opportunity from the Capital Markets Union (CMU) initiative during the final level 1 negotiations expected to end by the end of 2016.
Thresholds - the Commission says its key objective is to exempt offers below €10 million from any form of prospectus.
EU growth prospectus - introduced for SMEs and companies listed on future SME Growth Markets, and possibly some others venues, issuing securities below €20 million.
Wholesale market – debate on whether to keep the exemption for debt securities of at least €100,000 denominations.
Benefits of the Commission’s proposed new prospectus rules include retaining flexibility (allowing companies to choose the listing venue and follow local rules), noted Tilman Lueder of the European Commission. Dr Swinburne, MEP, said the European Parliament was in accord with many of the Commission’s goals for the new prospectus, which she believes should make it easier for smaller companies to raise capital across the EU. However, Dr. Swinburne disliked hurdles being placed in the way during negotiations, such as language requirements in each Member State, adding: ‘I fear that national regimes are dominating and we won’t get a seamless European system for capital flows.’ This was echoed by Ronan Dunne, ESMA, who said that a prospectus should be an informative tools for investors and other stakeholders rather than a liability shield, and Tim Ward, EuropeanIssuers, who felt that this sixth revision of the prospectus rules was ‘close to a missed opportunity’. Tim Ward explained that looking at US, EuropeanIssuers asked for an exemption from producing a prospectus for offers below € 50 million, while now the struggle is to keep it at 10 million as certain MEPs and Member States are trying to lower it to 5 million.
Richard Middleton of AFME recommended to take into consideration all Member States within the EU28. Many “High Potential Economies” (or EU11) within Europe could largely benefit from a well constructed Prospectus Regulation especially while setting level 2 requirements. Piet Hemschoote of EY, representing FEE, felt much could be done to shorten prospectuses by placing a significant amount of the information online instead. ‘It should be more concise, investor-oriented and business-focused,’ he said, adding that materiality should be considered for all the disclosures. Henrik Hursman, Nasdaq, highlighted strong growth of smaller company’ listings in Scandinavia This is due to the simple listing requirements on First North, i.e. the workable ‘company description’ document, the key role of the advisors and a fast-track approval by the listing venue. This was echoed by Tilman Lueder who applauded the exchange’s efforts.
‘Will the Prospectus Regulation work for smaller companies?’
co-hosted by the Association for Financial Markets in Europe (AFME), EuropeanIssuers, the Federation of European Accountants (FEE) and the Federation of European Securities Exchanges (FESE)
on Tuesday, 29 November 2016
Julia Verlaine, Journalist, Wall Street Journal
Tilman Lueder, Head of Securities Markets Unit, DG FISMA, European Commission
Dr Kay Swinburne, Member of the European Parliament
Ronan Dunne, Senior Policy Officer, ESMA
Richard Middleton, Managing Director, AFME
Tim Ward, Board Member and Chair of Prospectus Working Group, EuropeanIssuers; Chief Executive, Quoted Companies Alliance
Piem Hemschoote, Partner in Standard Assurance Services, EY
Henrik Husman, President, Nasdaq Helsinki
Brexit worries EU companies but ultimate impact remains an unknown
European Union corporates are concerned about the UK’s impending exit from the EU but the real impact is as yet unclear. This conclusion, one of several arising from new research by EY, sparked a lively debate about Brexit’s potential effects on the City of London, the UK and EU.
EU corporates believe that a ‘hard Brexit’ will have potential negative impacts on their business.
Potential impact of Brexit must be explained to a wider range of EU corporates and policymakers – this should be factual not political.
There remains time to ‘educate’ corporates, policymakers and financial firms about the potential impacts of Brexit: this should be our priority.
The EY study, commissioned by the City of London Corporation, presents the views of a small sample (15) of EU corporates of varying sizes in seven Member States on the perceived impacts of Brexit. It includes the views of 12 financial services suppliers, six academics and six European and UK trade associations plus industry data. It emerges that EU corporates believe that a ‘hard Brexit’ will have potential negative impacts on their business. According to Pierre Pourquery, presenting this study, ‘The loss of the City financial cluster would mean that the cost of some financial services, like funding, is likely to increase for EU corporates while the market capacity of these services may be reduced.’ He added that there is uncertainty over the scale of the potential increase in costs, the potential reduced capacity of services and the potential impact on the EU’s economic growth.
The study highlighted consensus about the value of the City cluster of financial services, such as the large talent pool and widely recognised legal and regulatory frameworks. These are unmatched anywhere else in Europe and hard to replicate in less than 20 years, as shown by cities such as Shanghai. Indeed, although Brexit may lead to a more fragmented City, it seems that there is no great urge for financial services to move abroad. ‘The UK makes lots of corporate lending to the EU, some £750 billion, so a hard Brexit could hit the EU hard,’ added Mr Pourquery.
‘Although London is a key financial hub, we mustn’t be complacent about the negative impact of Brexit on attracting business,’ said Jeremy Browne, City of London Corporation. Seb Dance, MEP, agreed and called for the UK government to listen to concerns and do everything possible to stay in the Single Market. ‘Rhetoric and reality must meet each other: not all 52% of the UK pro-Brexit voters are anti-Single Market,’ he added. Hans Hack of FTI Consulting also noted how Brexit could harm the EU, which benefits from UK expertise in financial regulation. He highlighted concerns about the City’s ability to keep the same access to the EU without passporting and equivalence.
Wrapping up the debate, Jeremy Browne said it looks likely Brexit will happen but that the City and UK must keep talking to Europe. ‘In some ways, the City is a supranational institution that transcends the UK. It’s a huge asset for the EU but it will have to adjust and adapt post-Brexit,’ he said.
‘The role of the City as a global financial centre for Europe’
hosted by the City of London Corporation
on Tuesday, 29 November 2016
Jeremy Browne, Special Representative of the City to the EU
Seb Dance, MEP, UK Labour Party MEP for London
Pierre Pourquery, Partner, UK Capital Markets, EY
Hans Hack, Head of Financial Services at FTI Consulting
Despite uncertainty, Europe will remain a top investment destination for global companies
In a fast-changing world with increasing political uncertainties, concerns exist regarding Europe’s attractiveness to international investment. At an Invest Europe and AmCham EU debate, major figures from the corporate and investor worlds shared their views on the prospects for future investment and how policymakers can help.
The single market is a key reason for investment in Europe: no place in the world is as integrated or has so many diverse opportunities.
Other drivers include Europe’s large and wealthy markets, skilled labour, legal stability, innovation and R&D.
US election and Brexit effects are unclear but perhaps not as bad as feared. The key for investors is regulatory certainty.
Fears that the US could disengage from investing in Europe may be ill-founded, concluded a panel of experts from both sides of the Pond. Gathered in Brussels, they examined reasons why the US will surely continue to invest strongly across Europe and may in fact ramp up investment in countries such as the UK (due to a falling pound) and Germany (strong pension funds). Both sides are committed to making Europe a more competitive place, despite challenges such as Brexit and reforms that the EU needs to make, concluded Susan Danger, CEO, AmCham EU and Michael Collins, CEO, Invest Europe.
Joseph Quinlan, Johns Hopkins University, noted: ‘Trump is a businessman and will listen to companies and not do a 180° turn on Europe,’ he added. ‘Europe has many assets and we need your R&D, markets and capital.’ As for trade deals like TTIP, Mr Quinlan reckons the US and Europe need to hit the pause button and educate people on the benefits foreign direct investment and trade.
‘We need to ensure the EU remains dynamic and push Member States to do structural reforms where necessary to survive changing markets,’ said Jyrki Katainen of the European Commission. He added that the Commission is working to increase the flow risk capital in Europe, through the European Fund for Strategic Investments and initiatives such as its €400m venture capital fund of funds. Eric Peeters of Dow Performance Silicones said his company had employed around 16,000 people in Europe for decades and would continue to be committed to the continent: ‘It may be a cliché, but we invest where the market is.’
As for the effects of Brexit, Gerry Murphy of Blackstone Group International Partners reckoned that this could now possibly encourage the EU to complete its single market, which would make Europe even more attractive to US firms. As for investment drivers for long-term investors such as private equity, he said Europe offered the sort of stability needed for investments that require five to 10 years to make a return.
In the panel debate, participants agreed that Europe has work to do integrating its single market, specifically its energy and services markets. A call from all sides was that policymakers consider the potential impact of regulation and the uncertainty that it might create, as this is ‘toxic’ for investors, commented Vice-President Katainen.
‘The Case for Investing in Europe’ debate
hosted by Invest Europe and AmCham EU
on Tuesday, 29 November 2016
Ryan Heath, Senior EU Correspondent, Politico
Susan Danger, CEO, AmCham EU
Michael Collins, CEO, Invest Europe
Jyrki Katainen, Vice-President, Jobs, Growth, Investment and Competitiveness, European Commission
Gerry Murphy, Senior Managing Director & Chairman of Blackstone Group International Partners LLP
Eric Peeters, Global Business Director, Dow Performance Silicones
Joseph Quinlan, Senior Fellow, Center for Transatlantic Relations, Johns Hopkins University
Channel Islands supports ambition to make the EU more attractive to global investors
The Governments of Guernsey and Jersey, at an informal reception in Brussels, underlined their mutually beneficial relationship with the EU and their key role in attracting major funds to invest here. After applauding the aims of the inaugural Invest Week, they noted the importance of the third country dimension under Capital Markets Union (CMU) for enhancing the EU’s appeal to international investors.
Guernsey and Jersey both specialise in channelling investment from around the globe into funds that are then invested in Europe.
The Channel Islands have actively engaged with the European Commission’s CMU initiative from the start in 2015, but are currently disappointed that the barriers to international investment into the EU have not so far been addressed.
Guernsey and Jersey look forward to the Commission extending to them the third country passport under the Alternative Investment Fund Managers Directive (AIFMD): this will boost the confidence of international investors and thus benefit EU growth and jobs.
The Channel Islands enjoy a close relationship with the EU. ‘We are entrepots for attracting globally mobile capital which can then be invested in Europe,’ said Gavin St. Pier, Chief Minister of Guernsey, who emphasised how this chimes with many of Invest Week’s themes. He added that around half of the £466 billion in funds managed or administered by Guernsey and Jersey comes from investors outside of the EU: these funds are largely invested into Europe’s key infrastructure and businesses.
The Channel Islands support the objective of making the EU more attractive to international investors. However, they are disappointed that the international dimension of CMU has so far not been prioritised. Guernsey and Jersey believe that the EU can signal it is ‘open for business as usual’ by soon extending the third country passport under the Alternative Investment Fund Managers Directive (AIFMD) to equivalent third countries and this will boost international investment. Research undertaken has shown that, over the next five years, this could potentially lead to a 10% increase in Channel Islands funds launched in the EU, with 20% greater capital per launch and a cumulative 40% increase in investment in EU infrastructure assets.
Ministerial visit by Gavin St. Pier, Chief Minister of Guernsey, and Ian Gorst, Chief Minister of Jersey and drinks reception
Hosted by CIBO (Channel Islands Brussels Office)
At L’Atelier restaurant, rue Franklin
on Tuesday, 29 November 2016
Gavin St. Pier, Chief Minister of Guernsey