ECON adopts draft reports on digital finance and the capital markets union

The European Parliament’s Economic and Monetary Affairs Committee (ECON) has adopted two draft reports on (1) digital finance and FinTech action plan and (2) the further development of the capital markets union (CMU).

In its report on digital finance, ECON sets out the following recommendations to the European Commission:

  • Cryptoassets – ECON recommends a comprehensive EU-wide open-ended taxonomy for new products, as well as for a common monitoring and supervision framework. The report also suggests targeted changes to current legislation, e.g. anti-money laundering legislation, to fill regulatory gaps;
  • Cyber resilience – the report recommends a common approach to cyber resilience of the financial sector. There should be legislative changes in the area of ICT and cybersecurity requirements for the EU financial sector, focussing on modernisation, compliance with international standards and operational resilience testing; and
  • Data protection – ECON highlights the need for the free flow of data within the EU to scale up innovative finance. However, the report warns that cross-border data flows, including to and from third countries, must be monitored and governed under EU privacy and data protection legislation.

ECON requests the Commission’s commitment to finalising a FinTech action plan by Q3 2020 and stresses that any EU measures should ensure that all market participants have space to innovate, be proportional and technologically neutral, risk-based and allow for high levels of consumer and investor protection.

In its draft report on the further development of the CMU, ECON recommends removing barriers and simplifying rules to improve access to capital market finance for SMEs, mid-caps and start-ups.

The report highlights the following points:

  • Simplified rules – ECON suggests targeted changes to align and simplify the existing provisions concerning for example capital requirements, reporting frameworks or listing requirements for SMEs regarding IPOs. The report also calls for an acceleration of the development of the EU venture capital and private equity markets to increase transparency and reduce fragmentation;
  • New provisions – the report urges the European Commission to adopt legislative proposals on European Secured Notes (ESNs), as a new dual-recourse funding instrument for banks, which could help improve access to financing for SMEs across the EU, or a European Single Access Point for financial and non-financial information in respect to listed and unlisted EU companies; and
  • Investor protection – ECON calls for a more harmonised approach to consumer and investor protection in the EU financial services legislation, adapted to the green and digital transformation, to ensure consistent and effective levels of protection across all financial products and providers.

ECON further highlights that the CMU should be a key contributor to the transition towards a competitive, resilient and sustainable economy complementing public investment and in line with the EU Green Deal.

The European Parliament will consider the CMU report in its plenary session between 5 and 8 October 2020.

Lucy Hadrill