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The EU’s Capital Markets Recovery Package – Finance and Banking

Because public financing alone will not be enough to boost
economies and businesses will need more equity after financial aid,
capital markets are vital to recovery across the EU. Accordingly,
as part of the Commission’s overall coronavirus recovery
strategy1, the EU’s capital markets recovery package
will introduce amendments to the EU Prospectus
Regulation2, MiFID II, the CRR3 and the
securitisation rules4. All of these measures aim to help
financial markets support Europe’s recovery and to complement
the EU’s Capital Markets Union aimed at integrating national
capital markets and ensuring equal access to funding.

The EU’s capital markets recovery package includes:
1. A new “EU Recovery Prospectus”, which is a short-form
prospectus to facilitate new funding in a short time period.
2. Alleviations to the MiFID II framework to encourage investment
in the real economy and free up resources for investors and
firms.
3. Improvements to securitisation rules to support SME lending and
management of non-performing loans.

The new EU Recovery Prospectus

. is

– A new short form prospectus format for well-known issuers,
focusing on essential information that investors need to make an
informed decision, displaying information on the issuer’s
prospects and significant changes in its financial position since
the end of the last financial year, essential information on
shares, the reasons for the issue, the impact on the capital
structure and the use of proceeds.
– A maximum 30-page document that will be easy to produce for
issuers, easy to read for investors and easy to scrutinise for
regulators.
– A fast-track issuance/approval procedure for secondary issuances
of listed issuers.
– A temporary disclosure document that will only be available until
18 months after the date of application of the revised Prospectus
Regulation.

. is relevant because it will

– Enable listed companies to issue capital more easily, swiftly
and cheaply, as it scaled down significantly from the usual couple
of hundreds of pages to just 30 pages, reducing issuance costs and
time to market.
– Incentivise issuers to raise equity instead of incurring further
indebtedness, thereby improving debt-to-equity ratios and making
companies more resilient.
– Benefit from the EU passport mechanism, meaning that investors
across the EU will be able to finance these companies if they wish
to do so.

The alleviation of MiFID II

. is

– The phase-out of the mandatory paper-based default method for
client communication, thereby reducing costs and accelerating the
investment process (unless retail clients opt-in to paper-based
information).
– The introduction of exemptions from the costs and charges
disclosure for eligible counterparties and for professional clients
(for services other than investment advice and portfolio
management) and from the ex-ante notification about costs for all
client-types to reflect the increased usage of…

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