Finansudvalget 2014-15 (1. samling)
KOM (2015) 0063 Bilag 2
Offentligt
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European Commission
Commissioner for Financial Stability, Financial Services
and Capital Markets Union
Mr. Jonathan Hill
13 May 2015
Dear Commissioner,
Thank you for the opportunity to respond to the Commission’s Green
Paper on Building a Capital Markets Union. I welcome the intentions and
ideas in the Green Paper.
In general, the Danish government is highly supportive of initiatives
aimed at opening up a wider range of funding sources for businesses and
generating further investment opportunities for investors through the capi-
tal markets in the EU with a view to promote economic growth and job
creation. An EU Capital Markets Union for all 28 EU Member States
which is tailor-made to the specificities of European markets has the po-
tential to become a useful source of funding for businesses, including
SMEs, in parallel to the banking sector. We agree with the Commission’s
approach of not harmonising for the sake of harmonisation itself but to
identify and address the specific barriers for developing a truly single
market for capital.
I agree with the approach of presenting possible new (legislative) initia-
tives where warranted as well as reviewing part of the existing EU legis-
lation.
In terms of the more concrete initiatives mentioned in the Green Paper, I
support a revision of the Prospectus Directive aiming at making prospec-
tuses less of a burden to SMEs and thereby making it more attractive to
seek funding via capital markets. The Capital Markets Union should en-
sure better functioning capital markets while at the same time safeguard-
ing the investor protection provided for in the legislative work during the
past few years.
I am also supportive of the development of simple, transparent and stand-
ardised securitisations to attract a broader investor base. Potential EU
legislation supporting a sustainable market should be clear and simple for
MINISTER FOR BUSINESS AND
GROWTH
Slotsholmsgade 10-12
1015 Copenhagen K
Denmark
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market participants to understand and act upon and sufficiently flexible to
ensure applicability in multiple jurisdictions.
Crowdfunding could be promoted by a common EU framework as a way
of giving entrepreneurs and SMEs easier access to capital. We have initi-
ated an analysis of the potential barriers to crowdfunding in Denmark and
of how crowdfunding can be promoted. The analysis concludes that the
greatest barrier to crowdfunding is the uncertainty of how to comply with
existing regulations. Therefore, we have developed clear guidelines for
participants in the crowdfunding market to comply with the regulation
while also introducing different initiatives to promote crowdfunding. We
are supportive of an analysis on how the use of crowdfunding in the EU
can be promoted.
Generally, we are positive towards initiatives aimed at increasing cross-
border mobility in the EU. At the same time, it is important to underline
that new legislative initiatives should leave sufficient flexibility for Mem-
ber States since company law and corporate governance are heavily influ-
enced by national regulatory tradition. We do not support further harmo-
nisation of taxation. In these policy areas, the way forward should in any
case be to begin by thoroughly identifying the specific issues that may
hamper a well-functioning single capital market before proposing any
further action. It may be that very specific and limited action has signifi-
cant effects, without the need for broad-scope harmonisation.
The supervision of capital markets is currently undertaken by the national
supervisory authorities who are well-suited as they have in-depth
knowledge of the particular characteristics of the national markets. We do
not see a need for extending the existing mandate of the European Super-
visory Authorities in this area but fully support exploring how they may
further contribute to the development of a single capital market within
their existing mandate.
As for a possible initiative in relation to covered bonds regulation, I will
stress that the Danish covered bonds market plays a major role in the
Danish economy. I am open towards discussing the need for an EU legis-
lative initiative based on experiences from well-functioning covered
bonds markets, including the Danish. However, it is vital that the Danish
mortgage credit system does not suffer negative consequences from any
new initiatives within the area of covered bonds. We look forward to con-
tributing further in an upcoming separate consultation on covered bonds.
Before being able to state any final position on possible future initiatives
outlined in the Green Paper, we would naturally need to analyse them in
detail. Our response, thus, constitutes our immediate viewpoints and con-
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cerns which we encourage the Commission to take into account in its con-
tinued efforts to build a Capital Markets Union.
In the enclosed annex you will find answers to the specific questions
posed in the Green Paper.
Yours sincerely,
Henrik Sass Larsen,
Minster for Business and Growth
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ANNEX – DANISH RESPONSE TO THE GREEN PAPER ON
BUILDING A CAPITAL MARKETS UNION
1. Beyond the five priority areas identified for short term action, what
other areas should be prioritised?
The Danish government agrees that the identified five priorities could
potentially contribute to the important goal of benefiting SME access to
finance without lowering investor protection.
This is not least the case regarding a revision of the
Prospectus Directive.
A prospectus should ensure tailor-made and relevant information to inves-
tors and help retail investors assess the terms and risks. Today there is a
tendency for prospectuses to be clouded by unnecessarily technical lan-
guage with extensive disclaimers and unfocused information. If the ad-
ministrative burden for companies, including SMEs, could be lessened
while preserving investor protection and securing relevant and concise
information to investors this could improve SME access to capital mar-
kets.
As regards
securitisation
the Danish government supports the develop-
ment of an EU market based on simple, transparent and standardised se-
curitisations. A potential EU framework supporting a sustainable market
should be clear and simple for market participants to understand and act
upon and sufficiently flexible to ensure applicability in multiple jurisdic-
tions.
To enhance Danish credit institution’s possibility of issuing securitisa-
tions, the Danish government has introduced a register-based system in
order to make it possible for financial institutions to effectively transfer
assets with a minimum of administrative burdens. Any new legislative
initiative with regard to securitisation should be able to encompass differ-
ent national approaches, including the Danish.
The development of a sustainable market for high quality securitisation
can only be done with the support of market participants. Even though
such a market will consist of simple, transparent and standardised securit-
isations, as a starting point I am unsure whether the market will be suita-
ble for retail investors since securitisation often tend to be very complex.
Removal of the existing legal uncertainty when securities are traded
cross-border would contribute to more efficient capital markets especially
if based on existing international agreements such as Geneva Securities
Convention and Hague Securities Convention. Therefore, the Danish
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government is very supportive of the idea of a legislative initiative regard-
ing
securities law
which could set out a horizontal approach for when
securities are traded cross-border. This could be considered as part of the
short-term or medium-term initiatives.
More broadly speaking, it is important that the Commission in coming
initiatives seeks to promote the liquidity of capital markets in such a way
that there is easy access for investors to resell securities. This would be
beneficial for their readiness to invest and decrease capital costs for busi-
nesses seeking funding through the capital markets. Therefore, the con-
nection between primary and secondary markets should be kept in mind.
For example corporate bonds should be promoted without losing sight of
the need not only to promote new issues but also the need to ensure li-
quidity in already issued bonds.
Recent years have seen the introduction of considerable amounts of new
EU rules and revised legislation where the impact remains to be seen.
These areas should not be the main focus of the Commission’s initiatives
in the short term. A good example is the question of pre- and post-trade
transparency where it is necessary to first see the effects of the recent
MiFIR/MIFID II legislation before engaging in possible new legislative
initiatives. This being said, the Danish government is open to explore
whether long-term investments, venture capital funds and social entrepre-
neurship funds could be promoted further beyond as the Commission
proposes the three recently agreed regulations in this area.
2. What further steps around the availability and standardisation of
SME credit information could support a deeper market in SME and
start-up finance and a wider investor base?
The Danish government agrees that in order to help SMEs better access
funding via capital markets it is essential that there is a regular flow of
comparable information about businesses available to investors. At the
same time, we agree with the goal of reducing the administrative burden
for SMEs. However, this should be done in such a way that sufficient
information is still provided. The international accounting standards
(IFRS) could, in a modified and less complex version, be used for SMEs.
We support the efforts aimed at ensuring consistency when data and re-
porting tools are applied. This could be a useful way of reducing the ad-
ministrative burden for SMEs. Efforts aimed at ensuring that sufficient
information regarding SMEs is available to investors could therefore be
developed in such a way that existing reporting requirements from SMEs
to e.g. business, tax and statistical authorities are taken into account.
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3. What support can be given to ELTIFs to encourage their take up?
The Danish government supports the Commission’s intention to encour-
age long-term investments, such as through the European Long-Term
Investment Funds (ELTIFs).
In order to encourage these funds, ELTIFs could be exempted from the
Prospectus Directive since ELTIFs are already subject to prospectus and
documentation requirements. Furthermore, the secondary markets for
ELTIFs should be strengthened in order to attract e.g. retail investors.
This could be done by the creation of a particular trading platform with
the purpose of making investments in ELTIFs attractive to retail investors
and more broadly promote the ELTIFs.
4. Is any action by the EU needed to support the development of pri-
vate placement markets other than supporting market-led efforts to
agree common standards?
Private placements could benefit from standardised documentation. Such
market-led standardisation could lead to more investors being attracted to
invest in the market. However, the Danish government supports the
Commission’s approach in terms of initially focusing on how to develop
existing initiatives regarding private placements. Existing well-
functioning markets should be analysed to inspire new initiatives in the
longer-term.
5. What further measures could help to increase access to funding and
channelling of funds to those who need them?
In order to increase access to funding, the liquidity of capital markets is of
huge importance - in order for businesses to attract investors, the latter
need certainty that they will be able to sell the securities they have pur-
chased. If this is not the case, businesses will be less likely to attract in-
vestors via capital markets at competitive prices. This should be taken
into account in both in level 1 and level 2 measures.
The Danish government suggests that the Commission looks further into
well-functioning secondary markets in order to promote highly liquidit
secondary markets which are a precondition for attracting investors.
It could be considered to improve liquidity in non-equity markets by look-
ing further into the market making function. In this context the Commis-
sion might consider (i) how to reduce the regulatory and administrative
burdens in connection with market making within and outside trading
venues, (ii) ways to ensure that e.g. trading mediators can manage their
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risks without having to disclose positions, e.g. because the disclosure of
positions could expose business strategies etc., and (iii) ways to give fur-
ther incentives to market makers to provide liquidity by reducing costs
related to their activities on the stock exchange on top of incentives in e.g.
MiFID II and the short selling regulation.
6.
Should measures be taken to promote greater liquidity in corporate
bond markets, such as standardisation? If so, which measures are
needed and can these be achieved by the market, or is regulatory ac-
tion required?
The Danish government generally supports initiatives and measures
aimed at promoting greater liquidity in the corporate bond markets. To
achieve this, investors need to be better able to quantify the credit risk of
those issuing corporate bonds (the SMEs).
As a rule, SMEs in Denmark do not make use of corporate bonds as a
source of funding. There may be various reasons for this. The most signif-
icant reason is believed to be the fact that it is too costly for SMEs to is-
sue corporate bonds. This likely relates to e.g. the expenses for corporate
financial advisers and the cost of having an individual ratings prepared by
a rating agency. As a consequence, the issuers use other sources of fund-
ing, including primarily bank loans.
The Danish government believes it could significantly improve the incen-
tives for SMEs to issue corporate bonds if it became easier for SMEs to
obtain a credit rating as it would improve the investors’ ability to quantify
the credit risk. In order to promote liquidity in the corporate bond market
the Danish government agrees that standardisation may be a way forward.
It may be considered whether – for instance in cooperation with bond
owner representatives (“a trustee”) – common standardised collateral type
can be developed which may optionally be attached to the individual bond
issuers. This will ease the burden of the issuer in connection with prepara-
tion of prospectuses as the risk factors may similarly be fairly standard-
ised.
7. Is any action by the EU needed to facilitate the development of
standardised, transparent and accountable ESG (Environment, So-
cial and Governance) investment, including green bonds, other than
supporting the development of guidelines by the market?
The United Nations Principles for Responsible Investments represent a
good tool for investors engaging in ESG investments. We would welcome
initiatives at EU level which correspond to the UN principles and which
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take into account the specificities of the EU capital markets. Also, the
development of guidelines by the market should be supported.
Initiatives supporting issuance of green bonds have already been under-
taken by e.g. the European Investment Bank (EIB) which has developed
climate awareness bonds. Any additional initiatives from the Commission
regarding green bonds should build on what has already been achieved.
8. Is there value in developing a common EU level accounting stand-
ard for small and medium-sized companies listed on MTFs? Should
such a standard become a feature of SME Growth Markets? If so,
under which conditions?
As opposed to the large and mid-cap segment, SMEs are generally not
subject to the same degree of investment analyses (if any at all) from pro-
fessional analysts. Therefore, it is up to the individual investor to analyse
whether the SME in question is over- or underrated.
Presentation of financial accounting information according to different
standards makes it difficult for investors to compare the financial perfor-
mance and key figures of the SMEs and therefore to prepare the analysis.
Companies admitted to trading on a regulated market must prepare finan-
cial statements in accordance with the international accounting standards
(IAS/IFRS). Although these standards ensure uniform accounting policies
across segments and borders, preparing the financial statements in ac-
cordance with IAS/IFRS involve high costs.
The Danish government therefore supports that SMEs admitted to trading
on the same type of market place (e.g. an SME growth market) are subject
to requirements to prepare financial information according to uniform
accounting standards. The generally applied accounting standards are
IAS/IFRS. A similar set of rules, preferably in a light version, could be
used in regard to SME financial accounting information when they trade
on SME growth markets.
9. Are there barriers to the development of appropriately regulated
crowdfunding or peer-to-peer platforms including on a cross border
basis? If so, how should they be addressed?
We have initiated an analysis of the potential barriers to crowdfunding in
Denmark and of how crowdfunding can be promoted. It concludes that
the greatest barrier to crowdfunding is the uncertainty of how to comply
with the existing regulations. We have developed instructions of how ac-
tors in the crowdfunding market comply with the regulation while also
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introducing different initiatives to promote crowdfunding. We are sup-
portive of an analysis on how the use of crowdfunding in the EU can be
promoted.
A harmonized regime for regulation of crowdfunding across the EU
would lower the barriers for cross border crowdfunding. A sufficient level
of investor protection – particularly for retail investors – should be pre-
sent in such a regime in order to secure the confidence of investors.
Using MiFID II as well as the common EU prospectus rules, payment
service rules, consumer credit rules and money laundering rules as a natu-
ral starting point, it should be assessed to what extent these rules should
equally apply to crowdfunding activities/platforms and in which areas the
rules could meaningfully be adjusted in order to facilitate crowdfunding
while preserving improvements in investor and consumer protection.
10. What policy measures could incentivise institutional investors to
raise and invest larger amounts and in a broader range of assets, in
particular long-term projects, SMEs and innovative and high
growth start-ups?
Presumably, if SMEs (and especially start-ups) were admitted to trading
on a regulated market, this could incentivise investments from institution-
al investors. However, this could have other implications. In particular, it
is likely to be overly burdensome for SMEs to have to comply with the
regulatory requirements for trading on a regulated market and the re-
quirements of market operators. The matter, thus, requires further analy-
sis.
11. What steps could be taken to reduce the costs to fund managers of
setting up and marketing funds across the EU? What barriers are
there to funds benefiting from economies of scale?
Further analysis should be made of whether there is room for more har-
monisation of the requirements to become an authorized manager, setting
up and marketing funds across the EU and other means to reduce the bar-
riers from entering the market of alternative investment managers.
12. Should work on the tailored treatment of infrastructure investments
target certain clearly identifiable sub-classes of assets? If so, which
of these should the Commission prioritise in future reviews of the
prudential rules such as CRD IV/CRR and Solvency II?
The Danish government agrees that capital requirements potentially could
have an impact on the level of infrastructure investments, since capital
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requirements influence the incentives and behavior of financial institu-
tions. We find that a particular focus on investments in digital infrastruc-
ture is very important and needed.
A favorable treatment of infrastructure investments is supported but this
should not jeopardize the undertakings’ incentives to act in the best inter-
est of policyholders and should not be at the expense of ensuring effective
risk management in financial institutions, which is at the core of CRD
IV/CRR and Solvency II.
The Danish government believes it to be important to find a balanced
solution, which ensures a prudent level of policyholder protection and
incentives for effective risk management.
13. Would the introduction of a standardised product, or removing the
existing obstacles to cross-border access, strengthen the single mar-
ket in pension provision?
In principle, standardization could enhance consumer protection. Howev-
er, this should be analyzed further before launching any new initiatives. In
particular, analysis is needed of whether the standardization of products
might clash with national legislative requirements.
14. Would changes to EuVECA and EuSEF Regulations make it easier
for larger EU fund managers to run these types of funds? What oth-
er changes if any should be made to increase the number of these
types of funds?
The idea of the EuVECA and EuSEF Regulations is to promote these
types of investments by reducing the requirements that such funds have to
fulfil. In general, the EuVECA and EuSEF Regulations apply only to
managers of collective investment undertakings with assets under man-
agement that do not exceed a certain threshold. Therefore, one way for-
ward could be to either increase this threshold or simply do away with it.
This could potentially increase the number of EuVECAs and EuSEFs.
However, allowing such a light regime for larger funds was not the origi-
nal intention behind the EuVECA and EuSEF Regulations. Therefore,
further analysis is needed before any changes to the existing framework
are proposed.
15. How can the EU further develop private equity and venture capital
as an alternative source of finance for the economy? In particular,
what measures could boost the scale of venture capital funds and
enhance the exit opportunities for venture capital investors?
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It needs to be analyzed further whether it is possible to further develop
private equity and venture capital as an alternative source of finance, in-
cluding the use of the venture capital funds.
16. Are there impediments to increasing both bank and non-bank direct
lending safely to companies that need finance?
In general, there should be room for increasing both bank and non-bank
direct lending to companies that need finance. In our view, banks do not
face significant impediments to lending safely to companies As far as
non-bank direct lending is concerned please refer to the answers provided
throughout this annex.
17. How can cross border retail participation in UCITS be increased?
It needs to be analyzed further whether there is room for more standard-
ized requirements between Member States regarding the marketing of
UCITS. The goal would be to improve the UCITS’ possibilities to attract
foreign capital.
18. How can the ESAs further contribute to ensuring consumer and
investor protection?
Financial stability and a high level of investor confidence are necessary if
capital markets are to be able to support growth and job creation. There-
fore, strong supervision is essential and a consistent application and en-
forcement of EU law is necessary. Thus, we are of the opinion that the
coordinating role of the ESAs within this area should be retained. For the
time being, however, we do not see a need to strengthen their powers.
ESMA and the competent authorities already have important powers to
protect investors e.g. in terms of managing licenses for trading. Further-
more, we find that the competent authorities basically have the necessary
powers to detect and react towards firms operating without legally re-
quired authorization. The attention should be directed towards the appro-
priate use of those powers.
The investor and consumer protection work already being done in the
ESAs, such as issuing warnings, is of high quality and very informative.
However, we do question to which extent the information reaches the
intended recipients (consumers and investors) and is actually used by the
average retail investor and consumer. We therefore find that more focus
and resources should be directed towards developing a strategy on how to
reach the targeted audiences.
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19. What policy measures could increase retail investment? What else
could be done to empower and protect EU citizens accessing capital
markets?
A prerequisite for increasing retail investment is the existence of investor
protection rules installing a sufficient degree of confidence among inves-
tors. Therefore, we need to be very conscious about not rolling back the
new and improved investor protection rules introduced in MiFID II in an
attempt to create easier access to capital markets for retail investors. On
the other hand, it would be equally inappropriate to introduce additional
investor protection measures to supplement the ones already agreed upon
in MiFID II before we have seen the effects of the new legislation.
20. Are there national best practices in the development of simple and
transparent investment products for consumers which can be
shared?
At the time being we do not have any best practice to share.
21. Are there additional actions in the field of financial services regula-
tion that could be taken to ensure that the EU is internationally
competitive and an attractive place in which to invest?
Generally, the Danish government supports the work done by the Com-
mission to ensure third country equivalence. This should be continued.
22. What measures can be taken to facilitate the access of EU firms to
investors and capital markets in third countries?
In order to facilitate the access of EU firms to investors and capital mar-
kets in third countries, it could be useful to find common ground with the
third countries on which rules to apply. This could be done via trade
agreements.
23.
Are there mechanisms to improve the functioning and efficiency of
markets not covered in this paper, particularly in the areas of equity
and bond market functioning and liquidity?
Generally speaking, the Danish government finds that the Green Paper is
the right starting point.
24.
In your view, are there areas where the single rulebook remains
insufficiently developed?
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There is room for developing the single rulebook in further detail. We
find that the short-term initiatives are the right place to start.
25.
Do you think that the powers of the ESAs to ensure consistent su-
pervision are sufficient? What additional measures relating to EU
level supervision would materially contribute to developing a Capital
Markets Union?
The Danish government agrees that if capital markets are to be able to
support growth and job creation it is necessary to have financial stability,
market integrity and investor confidence. Strengthened supervision is
essential and a consistent application and enforcement of EU law neces-
sary which is why ESMA’s role in ensuring convergence and sharing best
practices is vital. However, for the time being we do not see a need to
expand ESMA’s powers and mandate.
26.
Taking into account past experience, are there targeted changes to
securities ownership rules that would contribute to more integrated
capital markets within the EU?
In order to achieve more integrated capital markets with regard to market
infrastructure and securities law, the Danish government supports further
legislative initiatives that build on the improvements already made to se-
curities settlement in the EU through the CSD-regulation.
We would particularly welcome a solution to the issue of which legisla-
tion is applicable in cases of cross-border trade in securities. It is im-
portant to keep in mind that the Capital Markets Union will be part of a
global financial market and in our opinion the Geneva Securities Conven-
tion and Hague Securities Convention are essential in securing a solution
which is internationally compatible.
27.
What measures could be taken to improve the cross-border flow of
collateral? Should work be undertaken to improve the legal en-
forceability of collateral and close-out netting arrangements cross-
border?
Further analysis should be undertaken as to whether the area of financial
collateral arrangements and close-out netting might benefit from further
harmonisation.
28.
What are the main obstacles to integrated capital markets arising
from company law, including corporate governance? Are there tar-
geted measures which could contribute to overcoming them?
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Generally, any initiatives from the Commission regarding company law,
including corporate governance, would have to be analysed in detail, be-
fore the Danish government can state its position.
Corporate governance rules have already been incorporated into
MIFIR/MIFID II. These rules are not yet fully implemented in the Mem-
ber States and therefore their impact remains to be seen and explored.
The area of corporate governance and the implementation of guidelines
and recommendations have traditionally been closely connected to Mem-
ber States’ own regulatory culture and traditions. The flexible approach in
the area of corporate governance – where guidelines and recommenda-
tions are seen as a supplement to best practice in each Member State, and
enforced through the comply-or-explain approach, seems to be highly
appreciated by European companies. This approach does not seem to cre-
ate severe obstacles to an integrated market for the European businesses.
In relation to company law, we find that there might be obstacles for
cross-border establishment and need for a legislative initiative. It is im-
portant that the EU ensures trust when operating across borders whether
as a company, a shareholder or a creditor of a company.
It should be underlined that possible new legislative initiatives should
leave flexibility for Member States as company law and corporate gov-
ernance are areas that are highly influenced by the existing national well-
functioning regulatory traditions.
29.
What specific aspects of insolvency laws would need to be harmo-
nised in order to support the emergence of a pan-European capital
market?
Any initiatives from the Commission regarding insolvency laws would
have to be analysed in detail, before the Danish government can state its
position in this regard.
30.
What barriers are there around taxation that should be looked at as
a matter of priority to contribute to more integrated capital markets
within the EU and a more robust funding structure at company level
and through which instruments?
The Danish government does not support further harmonisation of taxa-
tion.
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31.
How can the EU best support the development by the market of new
technologies and business models, to the benefit of integrated and
efficient capital markets?
The Danish government welcomes the aim of ensuring consistency across
the application of data and reporting tools. New initiatives in this area
should be seen in connection with the reporting framework which has
already been chosen for reporting in other EU matters, namely the stand-
ardised technical language (XBRL).
We believe that the data should be collected and/or made accessible at
national level and then be transmitted further on to the European level
(e.g. ESAs and the ECB). This would ensure that companies would not
have to report data more than once.
32.
Are there other issues, not identified in this Green Paper, which in
your view require action to achieve a Capital Markets Union? If so,
what are they and what form could such action take?
Bond owners are often a diversified group. As a result they find it diffi-
cult to coordinate their negotiation positions such as in connection with a
bankruptcy. Thereby they de facto leave negotiations to other creditors.
By making use of representatives, bond owners are better able to coordi-
nate their positions and thereby ensure that their interests are duly repre-
sented and taken care of. Representatives are usually businesses which
specialize in providing financial business services. They are made use of
in Denmark and other EU Member States but rules on their rights and
obligations vary cross-border.
The Danish government would encourage the Commission to consider
common EU rules as part of creating a Capital Markets Union where the
representatives could be given legal privilege to represent the bond own-
ers in cases of default etc. It should also be considered to establish a Eu-
ropean register of recognised representatives.