Defining Europe's Capital Markets Union. Bruegel Policy Contribution Issue 2014/12, 13 November 2014

The new European Commission has signalled that it will work to create a ‘capital markets union’. This is understood as an agenda to expand the non-bank part of Europe’s financial system, which is currently underdeveloped. The aim in the short term is to unlock credit provision as banks are deleveraging, and in the longer term, to favour a more diverse, competitive and resilient financial system. Direct regulation of individual non-bank market segments (such as securitisation, private placements or private equity) might be useful at the margin, but will not per se lead to significant capital markets development or the rebalancing of Europe’s financial system away from the current dominance by banks. To reach these goals, the capital markets union agenda must be broadened to address the framework conditions for the development of individual market segments. Six possible areas for policy initiative are, in increasing order of potential impact and political difficulty: regulation of securities and specific forms of intermediation; prudential regulation, especially of insurance companies and pension funds; regulation of accounting, auditing and financial transparency requirements that apply to companies that seek external finance; a supervisory framework for financial infrastructure firms, such as central counterparties, that supports market integration; partial harmonisation and improvement of insolvency and corporate restructuring frameworks;and partial harmonisation or convergence of tax policies that specifically affect financial investment.

Public and Private Regulation: Mapping the Labyrinth. CEPS Working Document No. 370, October 2012

Private governance is currently being evoked as a viable solution to many public policy goals. However, in some circumstances it has shown to produce more harm than good, and even disastrous consequences as in the case of the financial crisis that is raging in most advanced economies. Although the current track record of private regulatory schemes is mixed, policy guidance documents around the world still require that policy-makers give priority to self- and co-regulation, with little or no additional guidance being given to policymakers to devise when, and under what circumstances, these solutions can prove viable from a public policy perspective. With an array of examples from several policy fields, this paper approaches regulation as a public-private collaborative form and attempts to identify possible policy tools to be applied by public policy-makers to efficiently and effectively approach private governance as a solution, rather than a problem. We propose a six-step theoretical framework and argue that IA techniques should: i) define an integrated framework including both the possibility that private regulation can be used as an alternative or as a complement to public legislation; ii) involve private parties in public IAs in order to define the best strategy or strategies that would ensure achievement of the regulatory objectives; and iii) contemplate the deployment of indicators related to governance and activities of the regulators and their ability to coordinate and solve disputes with other regulators.

Private long-term investment in uncertain times. Bruegel Policy Contribution 2012/23, December 2012

The economic and financial crisis in Europe is affecting the financing of long-term infrastructure investment. There are multiple clearly identifiable channels: reduced demand for long-term investment, a tightening prudential framework for lending, upward adjustment of risk perception, complex transition of the financial system, and increasing macroeconomic, sovereign and regulatory risk. Some of the identified channels are potentially dangerous spillovers from the crisis that entail the risk of a downward spiral (eg increasing regulatory risk), while others are efficient market responses (eg reduced investment demand, correction of pricing of risk). Consequently, public policy instruments should not address the accessibility of long-term finance per se, but should explicitly target the critical channels.