IN BRUSSELS Public mega debate on the project of the Union of Capital Markets

Today, in Brussels, the European Commission is hosting the first public debate on the project to create the Capital Markets Union, after 400 notes have been sent in during the preliminary consultations, including from Romania.

Through this project, which should be implemented in 2019, the European Commission has announced that it seeks to improve access to financing for all the companies infrastructure projects in Europe, helping SMEs obtain financing just as easy as big companies; the creation of a unified stock market by eliminating obstacles to cross-border investment; the diversification of the financing of the economy and reducing the cost of capital mobilization.

The goal of the Union of Stock Markets is to increase the size of the market, and part of that success is to raise capital from abroad, according to Steven Maijoor, the president of the European Securities and Markets Authority (ESMA), which has shown as an example the investment funds that have raised capital from Asian investments.

"Even though the EU capital markets have developed over the last few decades, still, the fragmentation persists, with a heavy national touch, sometimes, and with a smaller financing pool available for investments in the EU, through the stock markets, than in the US", said Valentin Ionescu, head of the Strategy and Financial Stability Department of the Romanian Financial Oversight Authority.

According to him, many capital markets in the EU are not competitive globally: "Compared to the US, the creation of the single capital market, in the EU, and the elimination of the cross-border barriers for capital flows will help diversify risk, will help create larger economies of scale, and therefore allows more efficient capital allocation.

The steps for raising capital should not be limited to the EU. Action should be taken to ensure that the EU is internationally competitive and attractive for making investments. This will require measures to increase the investors' financing need through the stock markets, to ensure a competitive, fair and efficient intermediation, at a proportional cost and last but not least, easier access to financing on the stock market by companies and individual investors.

These three elements are indissolubly connected. The goal of the Union of Capital Markets can only be reached by a program that focuses on the aforementioned elements. Therefore the proposed actions should be structured around them".

Valentin Ionescu further said that the integrated functioning of the capital markets requires the consistent application and the oversight through "single rule book". "This is essential to maximize the efficiency of oversight in the unified market. It is important for the oversight authorities to have equivalent powers to a great extent equivalent, and the desire to use them to ensure that consumers and the markets benefit from an equivalent level of protection", he also told us.

Steven Maijoor recently said that he hopes that after the union, the non-banking sector will have a greater weight in the financial system, and also that Europe will become a center for attracting capital in other parts of the world.

According to him, the Union will not involve an integration of the trading platforms nor a capping of the fees dictated through central planning.

Today's debates will be held in five sessions.

The participants - of which a large number are expected - will discuss the priorities of the Union of Capital Markets, access to financing - the reduction of dependence on bank loans as the main source for financing businesses -, and the investors' needs.

Romania has participated itself in the consultations stage. The deputies of the Budget and Finance commission have announced that they want to see a drop in tariffs and bureaucracy on the stock market, according to the observations prepared concerning the proposal of the European Commission to create the Capital Markets until 2019.

Romanian deputies seek support of the steps to have the Romanian stock market promoted from the frontier market to the emerging market category, by opening the markets to investment funds specializing in emerging markets, which will lead to an increase in the capital flows, and the increase of the volume of foreign investments and to the diversification of the financing alternatives for active companies.

Deputies also feel that the consumer protection must be ensured and banking activity, which requires licensing, must be more clearly separated from alternative forms of financing.

The total capitalization of the EU capital market was approximately 8.4 billion Euros (around 65 % of the GDP) at the end of 2013, compared to 1.3 billion Euros in 1992 (22 % of the GDP).