BRUSSELS, Sept 30 (Reuters) - The European Union will ease capital rules it imposed on banks and insurers since the financial crisis to help markets raise more funds for reviving sluggish economic growth.
The bloc’s financial services chief, Jonathan Hill, announced on Wednesday his “action plan” to put in place the building blocks of “capital markets union” or CMU by 2019.
European companies tap banks for up to 80 percent of the funds they need to grow and Brussels hopes its planned reforms will switch some of this heavy lifting to markets.
“I want to knock down barriers to make it easier for capital to flow freely across all 28 member states,” Hill said in a statement.
Early initiatives include making it easier for banks to sell high quality securities based on the pooling of loans like mortgages - known as securitisation - to institutional investors.
He also wants to encourage insurers to invest in infrastructure like roads and digital networks by cutting their capital charges on such investments.
It would be the first instance of regulators rowing back on regulation introduced during the financial crisis in a sign of how policymaker concern has switched to reviving growth.
Reviving Europe’s securitisation sector to pre-crisis levels would raise 100 billion to 150 billion euros ($112-$169 billion), the European Commission said.
So far, regulators from elsewhere in the world have not said they will also cut capital charges on banks who originate securitised debt in their jurisdictions.
Securitised debt based on low quality U.S. home loans became untradable in 2007, helping to spawn the crisis but Hill said the EU measure will focus only on the use of high quality loans to create “simple, transparent and standardised” debt.
His other quick wins include making it easier and cheaper for companies to issue bonds and shares.
More medium term aims include tackling politically sensitive issues like trying to harmonise tax and insolvency laws in the EU, areas that are typically member state domains.
Policymakers have said that creating a CMU will be as much about changing attitudes as reforming market practices.
Critics also say Brussels will have to persuade consumers in Continental Europe, long accustomed to squirreling away cash in a deposit account, to invest in riskier shares and bonds.
There is also suspicion among some politicians that the CMU is trying to foist Anglo-American market liberalism on Continental Europe with its social democratic traditions.
“CMU is ambitious. I hope the Commission can maintain its resolve to make it work so that these plans can deliver a single European capital market without obstacles,” Wim Mijs, chief executive of the European Banking Federation, said.
“If we want to reap the benefits in five years’ time CMU needs to be pushed now,” Mijs added.
$1 = 0.8883 euros Reporting by Huw Jones; editing by Susan Thomas