CFA Institute Response to the European Commission’s Capital Markets Union Mid-Term Review

In response to the European Commission's Capital Markets Union Mid-Term Review, Josina Kamerling, Head of Regulatory Outreach EMEA, CFA Institute, commented:

“CFA Institute welcomes the renewed focus on the Capital Markets Union in the Midterm Review Action plan published by the European Commission today. This stocktaking exercise is crucial within the context of Brexit and other geopolitical considerations, as well as the gamechanger implications of fintech for the financial markets. In a recent CFA Institute poll on the likely consequences of Brexit, 41% of members thought market uncertainty would last up to two years but a significant 22% thought this could be longer, indicating the need for firm action by regulatory authorities. In a recent CFA Institute guide for investment professionals on Brexit we clearly raise the concern that Brexit will have an impact on the way investment management will serve its clients. Passporting services have helped to create a strong link between the UK and the Continent, and it will be important to avoid affecting services to clients and a regulatory race to the bottom.

"Fintech will bring new challenges for regulators and highlight investor protection issues. In a survey examining the impact of fintech on the investment management industry, 40% of CFA Institute members suggested that robo-advice will have the most significant impact over the next five years. In its midterm review action plan, the European Commission clearly identifies the issues raised by fintech but also its potential to remove the capital markets ‘block’ and use the capital markets to boost the Eurozone economy. Some interesting ideas on EU passporting and licensing merit development and CFA Institute looks forward to contributing to this debate.

"In the CFA Institute response to the CMU midterm review, we highlighted the necessity for further work on the supervisory structure in the EU and the role of the European Supervisory Authorities. Today’s action plan sends a strong message in terms of priorities and a renewed ambition to move ahead with the Capital Markets Union. This is particularly encouraging for ESMA, which could potentially be a central point of homogenous supervision for EU-wide capital markets union. Another key message that CFA institute welcomes is a renewed look at the obstacles in cross border distribution for AIFMD and UCITS; an EU impact assessment should establish which issues are still outstanding around passporting and the marketing of funds. This was raised by CFA Institute in our comment to the midterm review as one of the clear obstacles in creating a liquid EU market for cross border investment and the one which is most subjected to ‘gold-plating’.

"Finally, we also welcome the focus on environmental, social and governance factors and how to better integrate it into the investment process. A greater focus on sustainable finance will result in a more sustainable economy, for the ultimate benefit of society. We therefore continue to support the work of the Sustainable Finance group within the European Commission.”