21 November 2013
Successful H+K Cercle Montoyer policy roundtable on financial services: long term financing of the European economy
On 16 November 2013, Hill+Knowlton Strategies Brussels organised another successful edition of its Cercle Montoyer policy roundtable on financial services, this time focusing on the long term financing of the European economy. As Europe is slowly getting out of its financial and sovereign debt crisis, the EU authorities are shifting their policy approach from reactive measures to control the financial system to proactive initiatives to stimulate economic growth.
In Europe, the real economy has traditionally been very much dependent on the banking sector for its funding, much more than in the U.S. However the introduction of more stringent banking regulation following the financial crisis has made banking credit more expensive. Businesses are therefore in search of alternative means of funding. Corporate bond markets offer a solution for large brands, but many entities will need to look for a reliable means of non-bank finance to realise long-term projects.
On 25 March 2013, the European Commission presented the Green Paper on the long-term financing of the European economy, setting out its policy for the near future. It was followed by a concrete legislative proposal for the creation of a Long-Term Investment Fund to finance long term projects such as energy, transport and communication infrastructure, industrial and service facilities, housing, as well as education and research programmes.
About 30 high-level stakeholder representatives, mainly from the business community but also from the public and non-profit sector, gathered at the H+K Brussels office to engage in a fruitful debate on how long-term funds can be channelled effectively to companies, and what the financial needs and demands are for companies willing to invest in long-term projects.
A keynote speech was given by Mr. Tilman Lueder, a senior official from the European Commission, who is responsible for the EU’s policy on long term investments. Focusing on the creation of a European fund, several key questions were addressed: Who will invest in it and who will manage these funds? How will these funds be structured? What kinds of companies need the money and how can we deal with the fund from a fiscal point of view?
The discussion that followed focused on details such as whether there should be different redemption rules for retailers and institutional investors, what tax advantages can be given to investors. The fee structure was also discussed in order to ensure that investors would benefit from the illiquidity premium. An import aspect of the debate was how these funds can become an international model similar to the UCITS brand. To that extent, the funds should have an international dimension and cannot be limited to the EU. The funds should be open to investors and users from other markets, like for instance China, that need incentives to stimulate economic growth.
As much still needs to be done, the Commission wished for a constructive collaboration between stakeholders and the EU institutions so an agreement can be reached before the EU elections in May 2014.
For more information about long term financing of the European economy, please feel free to reach out the Robrecht Vandormael and Joost Koomen in Brussels: email@example.com