Valdis Dombrovskis
John Thys | AFP | fake pictures
Strict financial regulations in Europe, known as Mifid II, have been in place for more than two years, but the change is just around the corner.
The European Commission, the EU’s executive arm, will announce adjustments on Friday to its Financial Instruments Markets Directive (Mifid), which was first introduced in 2007 and then updated in 2018.
The regulation led to a separation of the commercial and investigative arms of the brokerage houses. The goal was to make their stock recommendations completely independent of their business operations. However, the rules have led many brokers to stop publishing research on smaller companies as a way to cut costs.
In this context, the Commission believes that regulation is preventing much-needed investments in the real economy at a time when the region is reacting to a significant crisis.
“What we will present tomorrow is a specific package of measures to facilitate the financing of European companies through the capital markets, so there will be specific amendments to Mifid,” the European Commission’s executive vice president told CNBC on Thursday, Valdis Dombrovskis.
The proposal will outline a new “simplified recovery prospect to allow companies to go to the financial markets to raise capital, there will be some simplifications in securitization and we will also look at this issue of research disaggregation and how it is particularly affecting small and medium businesses”. companies and how we can deal with it, “added Dombrovskis.
Mifid is established by the EU and covers all 27 nations, and also affects transactions in other jurisdictions, such as when a US lender seeks to sell financial instruments to an EU-based client. The UK is expected to be fully out of the EU by the time the new amendments are adopted, but can choose to follow these rules.
The review comes just days after the EU reached an innovative agreement that will allow the Commission to tap markets and raise up to 750 billion euros ($ 869 billion), something the 27-member bloc had never done before. .
French President Emmanuel Macron (L) takes photos with his smartphone of a document held by German Chancellor Angela Merkel (R) during an EU summit in Brussels on July 20, 2020.
JOHN THYS | AFP | fake pictures
The so-called recovery fund will be distributed in the form of grants and loans in the coming years. It was hailed as a victory by all European nations after one of the longest EU summits over the weekend. It has also been well received by market participants.
However, Member States have not yet figured out how they will pay off this new debt. They will have to apply new taxes at EU level or increase their own contributions to the EU common budget.
Speaking to CNBC, Dombrovskis said the Commission “will soon” make detailed proposals for new taxes.
The issue is particularly sensitive for two reasons: there is no consensus among the 27 EU governments as of now on the implementation of new taxes; And there are some fears of potential retaliation from the United States, mainly if the EU approves a common digital tax.
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