EU adopts capital markets reforms

The Council of the European Union has adopted several legislative reforms as part of the progress towards the capital markets union.

The reforms target:

  • Sustainable finance. The first reform establishes disclosure obligations on how financial companies integrate environmental, social and governance factors in investment decision-making.  The second introduces the EU climate transition benchmarks, aimed at lowering the carbon footprint of standard investment portfolios and the EU Paris-aligned benchmarks, aimed at only selecting components which contribute to attaining the Paris climate agreement’s 2˚C reduction goal.
  • Investment firms. The reforms introduce new prudential requirements and supervisory arrangements for investment firms.
  • Covered bonds.  The Council has introduced a framework on harmonised product requirements and supervision of covered bonds to ensure a high level of investor protection.  It is hoped a harmonised regulatory framework will provide a more stable funding source for credit institutions.
  • SME growth markets. The reforms create a new framework to help SMEs access new funding sources.  The reforms amend the market abuse and prospectus regulations which place more proportionate obligations on SME growth issuers whilst maintaining market integrity.

The new texts will be signed in the week commencing 25 November and then published in the Official Journal of the EU.

Rachael Preston

Rachael Preston