IMF proposes upgrades to EU plan to develop capital market
LONDON: The International Monetary Fund (IMF) has suggested that the European Union (EU) improve transparency, regulatory oversight and insolvency rules in its proposals to create a capital market system to rival the US, a senior IMF official said.
EU efforts to create a capital markets union (CMU) has made little headway so far but is seen as offering major benefits, such as encouraging companies to raise more funds by issuing stocks and bonds, rather than continuing to raise loans from EU banks, some of which are still struggling to recover from the 2008 financial crisis.
The IMF is set to publish an analysis soon on the potential benefits of a CMU and recommend ways to improve it, said Mr Poul Thomsen, head of its European department.
He said on Friday the improvements focused on three areas - transparency, regulatory consistency and insolvency frameworks.
On transparency, the EU has proposed creating a single standardised template under the CMU for large bond issuers to make it simpler for companies and investors.
Mr Thomsen said listed equities amounted to just 68 per cent of gross domestic product in Europe compared with close to 170 per cent in the US.
The IMF is proposing "a major additional step (beyond EU plans) of instituting centralised standardised and compulsory electronic reporting for all issuers on an ongoing basis".
The fund is also looking for regulatory oversight to include "ex-post enforcement" to deter misconduct and be "deeply intrusive" for central counter parties and complex investment funds important to the wider financial system.
However, a more restrained approach could be taken to purely equity-based parts of the market that in theory should cause little contagion if they collapse.
"I would like to stress the importance of proportionality," Mr Thomsen said. - REUTERS