Frank Bold's inputs on the EU Capital Markets Union public consultation

In his political guidelines for the new EU Commission, President Juncker pledged to create a European Capital Markets Union (CMU) to increase non-bank financing of the European economy and further integrate capital markets. In this context, the EU Commission launched a public consultation in February 2015. Frank Bold submitted a response to the consultation and prepared an accompanying paper outlining the recommendations sent to the EU Commission on the guiding principles of a proper functioning CMU.

Frank Bold has stated that financing through capital markets is not appropriate for most private companies, especially SMEs, which will continue to be primarily financed through relationship-based bank lending. Private companies are often rightly concerned about listing due to the risk of pressure from capital markets. Therefore, Frank Bold recommends clarifications to the role of investors in corporate governance and the protection of corporate purpose.

More broadly, future policy should integrate sustainability and corporate responsibility into its central priorities. We highlight necessary changes to insolvency, company and tax laws for the development of a strong, stable and equitable pan-European financial market.

Our response includes the following recommendations:

• Clarify the role of investors in corporate governance
• Address corporate purpose
• Encourage firms to integrate ESG-performance criteria into remuneration policies
• Harmonise conflict of law rules
• Introduce safeguards to proposed single member companies (SUPs)

The next phase will be this summer when the EU's financial services commissioner, Jonathan Hill, will adopt an Action Plan establishing the roadmap to put in place the building blocks for CMU by 2019.

If you are interested to know more about Frank Bold's recommendations to promote sustainable financing of European companies you can read the accompanying paper to the CMU public consultation here. Written by Paige Morrow, head of Frank Bold Brussels Operations and responsible for the Purpose of the Corporation Project.