Connact: Call for a European investments regulation and for ESMA to become the European SEC

Brussels – A change of mentality and a change of rules. Whether political or regulatory, Europe’s investment culture needs to be rewritten, and the best way to do this is to overcome the fragmentation that still exists and is the result of a confederal Europe. Calling for a European “consolidated text” on capital and financial investments are industry players at the Connact Finance & Insurance event entitled “The EU plan to invest Europeans’ savings in European companies.”

Currently, the EU is suffering from a lack of a truly favorable environment for those working in the sector, denounces Maria Luisa Gota, managing director and general manager of Eurizon and head of Intesa Sanpaolo’s Asset Management Division. She focuses on the figure of the asset manager, the financial professional who manages money and securities on behalf of one or more clients intending to increase their value. “If you look at the scale figures, out of the top 20 asset managers in the world, 14 are from the United States, which manage 80 percent” of operations, she points out. So, “creating a European champion might be a good idea” for a more competitive Europe. However, we need a European market, which does not exist and risks not being there.

The EU is facing a demographic trend characterized by widespread aging. However, “those who retire receive 60 percent of their last salary,” Gota warns. Therefore, the savings that can be tapped to invest where European innovation and competitiveness are needed are limited. There is a need for “access to complementary pensions, on riskier but more remunerative asset classes, and here, “the EU has no competence, but it can give recommendations.” For all this, Gota has a suggestion for the European co-legislators: “The regulation is more useful than the directive because it avoids too many different ways” of tackling the challenge.

 Similar is the stance of Marcello Bianchi, Deputy General Manager of Assonime: it is necessary “to adopt a true unitary body of rules” that overcomes the current conformation of the EU characterized by “a multitude of individual regulations” that does not help to create an investment culture. “We need to standardize capital market rules in a consolidated text, possibly with a regulation.” Bianchi compares the single and the US market to highlight how the accounts do not add up. “Here, investors invest 15 percent of their total in Europe, so 85 percent is invested abroad. In the US, 75 percent is invested in the US.” This means that “European investors must be convinced, but a capital market must be created.”

Marcello Bianchi, deputy director general of Assonime

For Assonime’s deputy director general, “incentives are not enough. We need to make a whole system grow,” which implies real reform. Bianchi has an idea and offers it to the public and European politicians: ‘ESMA must become the European SEC if we want the capital market to become truly integrated. A European Securities and Markets Authority, like the US federal body responsible for the supervision of stock exchanges, is a scenario that should be considered according to sector experts.

The call for more Europe also comes from Fabio Marchetti, Head of Public Affairs and Regulatory Advocacy at Assicurazioni Generali: “The regulatory and supervisory fragmentation is getting us nowhere.” Therefore, we need “clear and harmonized regulations.” It is the only way to unlock the 10 trillion euros in private savings, sitting idle in bank accounts, which are considered crucial to fund what can enable the EU to be competitive. According to Marchetti, given a different appetite for risk, “we must look to longer-term savings instruments with lower risks to start investing.” The call by the Generali manager aligns with the ECB’s recommendations.

Given the need for new investment instruments, “European policymakers should redefine our risk tolerance,” suggests Ignace Gustave Bikoula, head of the Brussels office and Federcasse’s Regulatory Affairs and EU Relations Service. “We come from 15 years of zero-risk regulation for banks, intermediaries, and investors. The world has changed, and we need to redefine our future — and for that, we need investments.’ Why the emphasis? Because, he explains, “to invest you need a calculated level of risk.’ So here is a suggestion: current European rules define what financial instruments are “but omit credit, a widespread instrument.” That is why, Bikoula emphasizes, “we believe that credit can be considered a financial instrument.”