EUROPE – The European Commission's Green Paper on Long-Term Investing will not help improve market transparency and efficiency and, instead, only aims at creating new markets for pension funds and the private sector, one European group has claimed.

Speaking at the European Insurance and Occupational Pensions Authority (EIOPA) conference in Frankfurt yesterday, Mick McAteer, board member of the UK Financial Services Authority (FSA) and chairman of the European Commission's Financial Services User Group (FSUG), said that he was "quite optimistic" when he saw that the Commission was working on a Green Paper on long-term investing.

"I thought we would actually see some work to create more sustainable, efficient and effective long-term markets," he added.

"When I actually read the paper, it was not about making markets more transparent for investors, but it was more about creating new markets for pension funds and for the private sector."

"So again, I'm afraid the Commission and policymakers have the wrong end of the stick when it comes to creating efficient markets."

The FSUG group – set up in June this year and which comprises representatives of the various European national trade union organisations – aims at providing EU financial services employees with updates on the main developments on financial services regulation.

Speaking at the conference earlier on that day, Karel van Hulle, market and services head of unit at the European Commission, stressed that Brussels was currently considering whether the markets offer the right products for long-term investors as part of its drafting process of the Green Paper on Long-Term Investing and said that the Commission was looking at a number of sectors, including infrastructure, in its green paper.

"Again, we need to ask ourselves what infrastructure means. What type of products are we talking about?," van Hulle added.

"One of the main challenges is to find out whether the markets today have the right products for long-term investors.

"I think the market is also keen to develop products which are suitable for long-term investors and which deliver long-term cash flows and which can be matched with investors' liabilities. This is precisely the type of questions we are going to raise in the Green Paper."

The Commission hopes to publish its Green Paper on long-term investment at the beginning of next month.

Last month, IPE reported that it had identified three main areas of action in its Green Paper to address the lack of funding for long-term projects such as infrastructure, climate change technology, new innovation, R&D and digital technology.

A person familiar with the matter told IPE that the underlying issues related to capital flow and how to ensure capital was flowing in an effective way.

Additionally, Brussels is examining ways to ensure there is not an excessive focus on short-termism, and how to incentivise behaviour that is more conducive to long-term financing.

The Commission will also ask whether financial markets are channelling enough funds to long-term investments.

Also speaking at the EIOPA conference, Joanne Segars, chief executive at the UK National Association of Pension Funds (NAPF) and newly appointed chair at PensionsEurope argued that pension funds have to be able to invest over the long-term.

"The Solvency framework should not have negative effects and forcing investors into the same asset class [fixed income] at the same time of the cycle would, we believe, increase systemic risk to European financial markets," she said.

 

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