“Following the 2008 financial crisis, Capital Markets have been faced with a tsunami of new rules”
Expert commentary by Florence Bindelle, Secretary General, EuropeanIssuers
Congratulations to all the companies chosen to feature in 1000 Companies to Inspire Europe. The success stories showcased in this report are truly inspiring and promising regarding growth and job creation in Europe. I also congratulate London Stock Exchange Group for this initiative, recognising dynamic high-growth companies and acknowledging the importance of capital markets.
EuropeanIssuers represents the interests of publicly listed companies in Europe. Our mission is to ensure that EU policy creates an environment in which companies can raise capital through the public markets and can deliver growth over the longer term.
Following the 2008 financial crisis, capital markets have been faced with a tsunami of new rules, which aimed to prevent another crisis. While the rules were directed primarily at the financial industry, many spilled over to cover non-financial companies. It is felt that we have ended up in an overly regulated environment.
Since 2014, we have seen a change in the regulatory ambiance and more reflection on whether the rules that have been enacted are fit for purpose. But as EU legislative process takes time, many rules passed in the aftermath of the crisis have only recently become effective, e.g. Market Abuse Regulation, Non-Financial Information Directive and Markets in Financial Instruments Directive II. Hence, the impact on the markets has been visible only recently or is still to be observed. Some rules are yet to become effective; for instance, the revised Shareholder Rights Directive. While granting companies the long-awaited right to identify their shareholders, will also result in specific disclosure obligations on remuneration of directors and related party transactions, and more powers for shareholders.
In view of the EU elections next year, we would like to encourage policymakers to take a step back and reflect whether the EU capital markets legislation in force is fit for purpose and whether it is delivering the desired outcomes. We would also welcome a proper analysis of any regulatory inconsistencies and overlaps, and whether the intended benefits of rules outweigh the burdens and costs on the market participant. Before proposing any new legislation, we would also suggest to properly reflect whether the new rules are necessary.
Ending on a positive note, we very much welcomed the EU Commission’s intention to introduce a more proportionate regulatory approach to support listing smaller companies. We applaud the aim to boost the number of initial public offerings, to reduce the administrative burdens and the high compliance costs faced by smaller issuers. Nevertheless, we fear that more needs to be done to achieve a fully proportional environment for smaller companies and healthy and thriving European capital markets. To enable focused and proportionate regulation, we believe that a definition of a small and mid-cap company, differentiating such companies from small to medium-sized enterprises as well as from large companies, is essential.