Following the severe economic repercussions of the COVID-19 pandemic, the European industry rapidly called for measures to facilitate investments in the real economy, to allow for a swift recapitalisation of EU companies, and to enable issuers to tap into public markets at an early stage in the recovery process and increase banks’ capacity to finance the recovery.
As part of this work starting in March 2020, the ABBL and its members provided valuable input to the Luxembourg and EU authorities on which measures would be most helpful to boost economies and businesses, notably when it comes to increased equity needs after public financial aid, as well as the crucial role capital markets play in the recovery process.
The EU capital markets recovery package focused on three pillars, with targeted amendments to the EU Prospectus Regulation, the MiFID2 framework, and relevant prudential rules to alleviate the EU securitisation process. All of these measures help financial markets support Europe’s recovery and to complement the EU Capital Markets Union aimed at integrating national capital markets and ensuring equal access to funding.
Following several discussions in which the ABBL, on behalf of its Members, interacted with political leaders at national and European level, as well as a strong collaboration within the European Banking Federation, the EU capital markets recovery package has been adopted with a focus on the following main measures:
- A new “EU Recovery Prospectus”, which is a short-form prospectus to facilitate new funding in a short time period.
- Alleviations to the MiFID2 framework to encourage investment in the real economy and free up resources for investors and firms.
- Improvements to securitisation rules to support SME lending and management of non-performing loans.
These measures will help Luxembourg banks to play their chosen role of assisting the real economy throughout the consequences of the ongoing crisis. Coupled with the measures taken at national level, such as the loan moratoria and the state-guaranteed loans, the Luxembourg economy is in a good position to recover through an improved access to funding, much required in the current times.
By Gilles Walers