Industry calls for regulatory reform in EU initiative

As part of the EU’s Capital Markets Union initiative, the EVCA is recommending changes to Solvency II and AIFMD to support greater cross-border investment.

The European Private Equity & Venture Capital Association (EVCA) has submitted its recommendations to the European Commission’s Capital Markets Union consultation, requesting changes to Solvency II rules and rules governing pension fund investment in order to create a level playing field for private equity and venture capital managers wanting to raise capital and invest in businesses across the EU.

The proposals are part of the EVCA’s 47-page response to a green paper issued by the Commission in February, which outlined Financial Services Commissioner Jonathan Hill’s vision for more effective capital markets across Europe. The paper called for submissions regarding regulatory changes that could help make it easier for small businesses to raise money and make Europe a more attractive place for global institutions to invest.

“Institutional investors have capital to invest. The challenge for Capital Markets Union is to connect those investors with SMEs and startups. Private equity is one such connection” said EVCA chief executive Dörte Höppner in a statement. “We need rules that help fund managers to raise capital and to invest across national borders, wherever they see the opportunities. Otherwise companies in Europe will continue to lose out to markets such as the US and Asia.”

EVCA’s key recommendations include a reduction of the 39 percent risk weighting for private equity, venture capital and infrastructure funds under Solvency II legislation and amendments to prudential regulation on banks and pension funds in the Capital Requirements Directive IV and the Institutions for Occupational Retirement Provision Directive to promote investment in private equity and venture capital funds.

EVCA also calls for better access for European investors to non-EU funds through a third country passport scheme under the Alternative Investment Fund Managers Directive (AIFMD) and the extension of European Venture Capital Funds Regulation to allow a wider range of fund managers who support SMEs to use the third country passport scheme without triggering the prohibitive costs of full AIFMD-registration.

The European Commission will host a public hearing on the next steps to build a Capital Markets Union in Brussels on June 8, and plans to publish an action plan later in 2015.