Brian Hayes MEP today said that the EU’s new Capital Markets Union (CMU) project represents a major boost to improving the financial services sector in Ireland. Mr. Hayes was reacting to the launch of the Capital Markets Union Action Plan by European Commissioner for Financial Services, Jonathan Hill.
“One of the major problems in Ireland and Europe at the moment is that businesses have to rely too much on banks for lending and often banks are not willing to lend. According to a recent ISME survey, 45% of Irish SMEs that applied for funding in the last 3 months were refused by their banks.
“This financing problem for companies is exactly what the EU’s new Capital Markets Union seeks to address. This major project which will be introduced throughout the lifetime of this European Commission (2014-2019) will open up new alternative forms of lending to businesses, especially small businesses.
“Through today’s Action Plan on CMU, the Commission has outlined a balanced and realistic timetable with proposed actions to be launched over the next 3 years. These include initiatives such as: introducing a pan-European venture capital fund, building a harmonised EU market for Securitisations and removing barriers for small firms who want to be traded on public markets.
“The big opportunity for Ireland is in the area of securitisation – this is something that the IFSC has real expertise in. Since the crash securitisation has reduced by at least half and Dublin could be a big winner if the skills behind securitisation take off again. In the area of crowdfunding and venture capital funding, Dublin is way ahead of other financial centres. It is interesting to note that 10% of the industry submissions on CMU came from Ireland. This shows that there is major interest in non-bank lending from an Irish perspective.
“Essentially, Irish banks cannot fill the funding and investment gap that Ireland needs. Because of the crisis, the banking sector must become safer but that means it cannot operate at the same size it has in the past. Something must come and replace it. That replacement can only be investments that are channelled through the capital markets.
“In Europe we are miles behind the US in terms of non-bank lending. In the EU 70% of borrowing comes from banks and only 30% from capital markets; in the US it is the opposite – 70% of borrowing comes from the capital markets.”