The European Commission (Commission) has published a speech by Vice President Valdis Dombrovskis, European Commissioner for Financial Stability, Financial Services and Capital Markets Union, on the merits of upholding a strong international financial system.

In his speech, Mr Dombrovskis notes the Commission has almost completed the first wave of measures in relation to the Capital Markets Union. It’s proposal to restart securitisation markets by defining simple, transparent and standardised securitisation is currently being handled by the Council of the EU and the European Parliament. The proposal to overhaul the Prospectus regime to make it easier, faster and cheaper to issue public equity and debt was agreed at the end of 2016 and the proposal to strengthen Europe’s venture capital markets is being discussed by the European Parliament. In terms of the second phase of the project, the Commission wants to quicken the pace on existing work such as measures to make business restructuring easier and plans to build a pan European private pensions market. For areas such as fintech and sustainable finance, the Commission has launched a public consultation and will release a midterm review before the summer.

Mr Dombrovskis also highlights the advantages of international regulatory co-operation and the common approach to financial regulation and suggests that that the effect of financial centres such as New York, London, Paris and Frankfurt having very different rules would be:

  • increased exposure to risks imported from jurisdictions with less stringent rules;
  • increased expense for global financial institutions having to comply with different legal requirements; and
  • greater incentives for financial institutions to engage in regulatory arbitrage which could lead to an accumulation of under-regulated activities.

View European Commission speech on international financial system, 13 February 2017