lunes, 29 de febrero de 2016

Capital Markets Union: a Marathon not a Sprint


Since the Action Plan for a Capital Markets Union[1] (“CMU”) was launched on 30 September 2015, the European Commission (“the Commission”) has initiated a number of CMU initiatives. Notably, building on the CMU’s initial announcements and plans (see the K&L Gates Policy Alert from October 2015here), the CMU includes a large number of medium-to-long term initiatives and reforms that will be developed and implemented over the coming years. Thus, it is critical for potentially impacted stakeholders to actively monitor developments and systematically engage going forward.  This alert takes stock of progress made and looks at the steps ahead.
Progress on the first measures

Over the past months the Commission published various initiatives in the framework of the CMU Action Plan.

Securitization. The Commission began by publishing a regulatory proposal [2]to develop simple, transparent and standardised (“STS”) securitisation for the European Union (“EU”). The proposed regulation sets common rules and criteria for the new STS securitisation label. While the Council of the EU has already adopted its general approach, the European Parliament (“the Parliament”) has just started working on the proposal under the leadership of Rapporteur Paul Tang (S&D, NL). 
The STS securitisation text is accompanied by another proposal [3] to amend the Capital Requirements Regulation (“CRR”) in order to make the capital treatment of securitisations more risk-sensitive and able to reflect STS securitisation features. While the Council already agreed on a common approach on this proposal as well, Pablo Zalba (EPP, ES) has been named Rapporteur and will lead the Parliament’s work over the coming period.
The Dutch Presidency of the Council said that it might be able to complete work on the securitisation files during its term,[4] which ends on 30 June 2016. However given the political sensitivity around securitisation and the stigma attached to these transactions following the financial crisis, it remains unclear whether this is achievable.
Prospectus Regulation. In late November, the Commission put forward a proposal [5] to replace the existing Prospectus directive. The initiative broadly aims at reducing the costs and burdens associated with issuing prospectuses, in particular for small and medium companies.
The co-legislators have started working on the file and Rapporteur Philippe De Backer (ALDE, BE) is leading the European Parliament work on the file.  While some contentious issues are likely to emerge during the discussions, such as the amount of Level 2 provisions foreseen in the Level 1 text, details around the prospectus’ summary, and the retail/wholesale disclosure regimes, both the Member States and the Parliament seem broadly favourable to the key objectives of the proposal. Negotiations on this file will continue under the Dutch Presidency of the Council and, starting in July 2016, the Slovak Presidency of the Council is likely to take over the work on this file.
Solvency II. The Commission also made a number of amendments [6] to the Solvency II Delegated Regulation providing lower risk calibration to be applied to qualifying infrastructure investments, as well as preferential capital charges for investments in European Long-Term Investment Funds (ELTIFs). While the Council has announced that it will not object to the Amending Regulation, the European Parliament has extended until 30 March the deadline to raise its potential objections.
Building on stakeholders’ input 
As part of the first set of CMU initiatives, the Commission launched various public consultations with the aim to gather stakeholders’ feedback on various CMU elements. These public consultations are key channels for stakeholders to convey suggestions and specific concerns.

The first two policy consultations, on covered bonds and on venture capital, closed on 6 January 2016. Responses to the consultation on covered bonds have already been published by the Commission on its website.
In addition, the Commission launched a broad call for evidence on the EU regulatory framework for financial services. The consultation, closed on 31 January 2016, sought to gather views and feedback on potential overlaps, loopholes and inconsistencies of the post-crisis regulatory framework and to identify rules that affect the ability of the economy to finance itself and growth. The Commission received hundreds of responses to its call for evidence, which are available online. The Commission is now analysing the input received in the framework of these consultations and is expected to produce reports setting the ground for future actions.
The Commission also reached out to stakeholders with a Green Paper [7] on retail financial services published on 10 December 2015. Comments on the Green Paper can be provided by 18 March 2016 [8]It includes questions on how to address challenges brought by the digitalisation of retail financial services and how to increase the cross-border dimension of the single market. Following the end of the consultation period, the Commission is expected to publish an Action Plan outlining the next steps.
Key steps ahead
The Commission is expected to put forward various initiatives on other aspects of CMU in the course of 2016.[9] Over the coming months, these are expected to include initiatives related to facilitating cross-border investment, including a consultation on barriers to the cross-border distribution of investment funds, and a package of measures to stimulate venture capital in the EU.

Furthermore, the Commission will look at the feasibility of a policy framework for the creation of a market for European personal pensions, as well as at a legislative initiative on insolvency.
Looking further ahead, the Commission intends to address key issues like the debt-equity tax bias and to foster support for equity financing. Elements in this direction should be included in the legislative proposal on a Common Consolidated Corporate Tax Base (CCCTB), which is expected to comprise various measures to bring harmonisation in EU corporate tax regimes.
Conclusion
There has been momentum building around the CMU project over the past months and this can continue despite the occasional difficulties to be expected along the way.

Strong political will by all co-legislators will be needed to finalise negotiations quickly on specific files, and all parties involved must remain fully committed to the project. Importantly, the Commission is expected to prepare regular progress reports on the actions included in the CMU Action Plan.
Given the long-term, iterative nature of the CMU process, it is paramount that stakeholders continue playing an active role to ensure that policy-makers remain strongly focused and deliver on the CMU priorities.

The European Parliament: a sword of Damocles hanging over Cameron Philip Kyle


David Cameron had a tough time trying to convince his European counterparts at the European Council; but hopefully he will be up for seconds when he goes head-to-head with the European Parliament. He paid its Members a long overdue visit last week, but only met with a select few. He will have to do more than that if he wants to avoid more drama.
There is nothing Members of the European Parliament hate more than being left out. Add to that being told what to do by a Member State government and you are serving them a very bitter cocktail. There is not an awful lot of respect as it is in Westminster for Brussels and its Parliament; but if ever there was a time to pretend, it is now.
MEPs have, in effect, power to veto part of Cameron’s deal, through the legislative process needed to bring about some of the EU reform, such as the ’emergency brake’. This is set to happen after the June referendum, but it will be a sword of Damocles hanging over Cameron during the whole campaign; one that his detractors and indeed the Parliament itself are happy to remind him of.
Its left-wing President, Martin Schulz, said last week that the European Parliament would do its ‘utmost to support the compromise and a fair deal’. In the same breath, he said that he did not guarantee the result. Later in the week at the European Council meeting, Schulz made it clear that MEPs would stand up for the rights of EU citizens at large: ‘an ever-closer Union should not only be about our past, but what we can do together. A majority of Member States and citizens want to go further.’ Cameron has been warned.
There was evidence again Wednesday that the European Parliament will put up a fight. The very outspoken and influential leader of the liberal group, Guy Verhofstadt, despaired of what he called a ‘glorified cockfight’ between Cameron and Boris Johnson, saying it was ‘pathetic for Britain’. Manfred Weber, the Bavarian leader of the main right-wing group (EPP), close to Angela Merkel, offered some support to Cameron last week; but it would be wrong to assume that he speaks for the 216 members of his group.
Françoise Grossetête, the current Deputy leader of the EPP group, is not opposed to some of the reforms the British Prime Minister wants for Europe. But she warns there are ‘red lines which we will not cross’. Unsurprisingly she talks about one of the EU’s fundamental principles: freedom of movement. In a Facebook message posted Wednesday she writes that Cameron has won a battle with his EU deal, ‘but not the war’. With suggestions that freedom of movement of EU workers should be restricted and the talks around the ’emergency brake’, Cameron has had to endure much criticism not only from the European Left, but also the European Right.
In the European Parliament, Tory MEPs do not sit with many of their European conservative counterparts. In 2009, they decided to create a separate entity, the European Conservative and Reformist (ECR) group which brings together an odd mix of parties from countries such as Poland, the Czech Republic, the Netherlands as well as the German AfD party whose leader recently suggested firearms should be used to prevent illegal border crossings. All parties in the ECR group have in common a eurosceptic – or ‘eurorealist’ as they like to style themselves – approach to EU politics.
On some issues they are a natural ally to the EPP group. On others they struggle to find common ground. This seems to be very much the case with Cameron’s EU reform. The Tory party’s own representatives in Brussels seem uneasy with the British Prime Minister’s position. Most of them refused to comment on the apparent tension which exists today with their EPP counterparts. The reason is quite straightforward: on a day-to-day basis they work very well together, but on wider issues such as the future of the EU, they do not succeed in seeing eye-to-eye. It is already clear that with the referendum debate and the way he has ignored Parliament thus far, Cameron has managed to divide further the European conservatives.
Constance Le Grip, another French EPP MEP, former advisor to ex-President Nicolas Sarkozy, does not beat about the bush: ‘we are happy to negotiate but we do not want a British gun to our heads’. Like Grossetête, she likes to think Tories and EPP Members can find common ground. They both took part in a meeting last year between the French right-wing ‘Republican’ MEPs and their Tory counterparts. Initial efforts to work together seem to have been stalled and there is a growing sentiment among EPP MEPs that Cameron’s requests are unreasonable.
Pablo Zalba Bidegain, a young right-wing Spaniard, who sits on the committee on Economic and Monetary Affairs, strategic to UK interests, diplomatically says: ‘it is time to start working on compromises’. His Bulgarian colleague Eva Paunova sums up what many in the EPP group feel today: ‘we are ready to discuss in detail Mr. Cameron’s suggestions, to see if and how they can make all Europeans better off.’
This is wishful thinking on their behalf. Cameron has promised to put UK interests first. Politically, he has no choice. Pleasing Brussels and keeping backbenchers – or indeed members of his own Cabinet – happy are two very different things. Aligning UK interests with all European interests seems to be mission impossible; but it will be key to salvage any chance of some reform, even if British voters chose to remain in the EU on 23 June.
It would be wrong to underestimate the European Parliament. Cameron has thus far. It is time to do some damage control. Rallying support from other European conservative MEPs might be a good place to start.

jueves, 25 de febrero de 2016

jueves, 4 de febrero de 2016

CAMERON’S EU REFORM DIVIDES EUROPEAN CONSERVATIVES


As David Cameron attempts to negotiate a « better deal » for the United Kingdom in the EU, other European right-wing parties represented in the European Parliament worry about the effect of such negotiations for EU citizens at large.

She walks with a lot of confidence and energy. When she shakes your hand, you can’t help but feel the passion the 69 year-old still has for her role as a Member of the European Parliament. Françoise Grossetete has been a French Member of the Brussels chamber for over 20 years now. As the current First Vice-President of the European People’s Party (EPP) group, the largest political group in the European Parliament, she is both an influential and trusted member of the pro-European right-wing movement.  
Her eyes light up when quizzed about David Cameron and the EU referendum. Like many in the EPP group, she is not opposed to some of the reforms the British Prime Minister wants for Europe – on subsidiarity in particular. Grossetete goes so far as to say: “the EPP group is ready to support David Cameron in his quest to win the referendum”. But she warns there are “red lines which we will not cross”. Unsurprisingly she talks about one of the EU’s fundamental principles: the freedom of movement. With suggestions that freedom of movement of EU workers should be restricted, Cameron has had to endure much criticism not only from the European Left, but also the European Right who should be his natural allies in this pivotal battle for the future of the UK and the EU alike. 
In the European Parliament, Tory MEPs do not sit with many of their European conservative counterparts. In 2009, they decided to create a separate entity, the European Conservative and Reformist (ECR) group which brings together an odd mix of parties from countries such as Poland, the Czech Republic, the Netherlands as well as the German AFD party whose leader recently suggested firearms should be used to prevent illegal border crossings. All parties in the ECR group have in common a eurosceptic – or eurorealist as they like to style themselves – approach to EU politics.
On some issues they are a natural ally to the EPP group. On others they struggle to find common ground. This seems to be very much the case with Cameron’s EU reform which he has promised to deliver ahead of the Brexit referendum. The Tory party’s own representatives in Brussels seem uneasy with the British Prime Minister’s asks. Most of them refused to comment the apparent tension which exists today with their EPP counterparts. The reason is quite straightforward: on a day-to-day basis they work very well together, but on wider issues such as the future of the EU, they do not succeed in seeing eye-to-eye.
Constance Le Grip, another French EPP MEP, former advisor to ex-President Nicolas Sarkozy, does not beat about the bush: “we are happy to negotiate but we do not want a British gun to our foreheads”. She adds that the “take it or leave it ultimatum is extremely clumsy”. As Grossetete, she likes to think Tories and EPP Members can find common ground. Franck Proust, another EPP MEP who was elected in the South of France, believes Cameron should be clearer in his intentions and regrets that up until now the British Prime Minister has been improvising, rather than presenting a real strategy. All three took part in a meeting last year between the French right-wing “Republican” MEPs and their Tory counterparts. Initial efforts to work together seem to have been stalled and there is a growing sentiment among EPP MEPs that Cameron’s requests have become unreasonable.
Pablo Zalba, a young and dynamic right-wing Spaniard, who sits on the Committee on Economic and Monetary Affairs, strategic to UK interests, offers a pragmatic view of Cameron’s intentions: “I don’t think he believes he will be able to obtain everything he is asking for. It is time to start working on compromises”. His Bulgarian colleague, Eva Paunova, very passionately argues that Cameron’s ideas on benefits for EU citizens are flawed, given that they do not have an automatic right under EU law to claim benefits when they arrive in another EU Member State.
Paunova sums up what many in the EPP group feel today: “we are ready to discuss in detail Mr. Cameron’s suggestions, to see if and how they can make all Europeans better off.” This is wishful thinking on their behalf. Cameron has promised to put UK interests first. Aligning UK interests with all European interests seems to be mission impossible. They will all have to work at it together though, if they want to salvage any chance of keeping the UK in the EU.