Watchdog wants action to revive Europe's shrinking equity markets

LONDON, June 27 Thu Jun 27, 2013 10:15am EDT

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LONDON, June 27 (Reuters) - Europe's equity markets have a vital role to play in the region's economic recovery and policymakers need to ensure they are regulated in a way that promotes the long-term investment companies need, the head of Britain's corporate governance watchdog said on Thursday.

"Equity markets are shrinking before our eyes," Sarah Hogg, chairman of the Financial Reporting Council, said. "But risk capital is essential to business, fuelling investment and economic growth, generating jobs and wealth for future generations," she said in a speech to the annual conference of the Federation of European Stock Markets (FESE) in Berlin.

The number of firms listing on stock exchanges globally has fallen since the financial crisis due to economic and political uncertainty.

The FRC pointed to data from the Organisation for Economic Cooperation and Development, which showed that the number of new listings in OECD markets was 650 over the past decade, a 44 percent drop from 1,170 in the decade before.

London Stock Exchange figures showed the number of listed companies fell more than 20 percent between 2008 and 2012, the FRC said.

The European Commission has already considered how to develop pools of long-term capital to invest in stock markets and asked for submissions on the subject during a consultation period. It is expected to publish the results of the consultation shortly.

In its submission, the FRC said the Commission should look at why investors such as insurers and pension funds are moving away from equity markets, the costs of investing in stock and whether there is any legislation that places an unfair burden on listed companies.

Hogg also said equity markets needed to be regulated to ensure investors could trust their integrity, but also to ensure listed companies could attract finance for investment.

She said businesses in other fast growing regions were seeking a greater share of funds, potentially making it more difficult for European businesses to access capital.

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