Speech: Remarks of Vice-President Valdis Dombrovskis at the Bloomberg Event “Rebooting the Capital Markets Union” - Hoofdinhoud

CHECK AGAINST DELIVERY, 6 NOVEMBER 2019

Ministers, Excellencies, Members of the European Parliament, ladies and gentlemen

Ten years ago, the financial and economic crisis brought us widespread disruption across financial markets and the global economy.

In Europe, it taught us some powerful lessons about cooperation. We learned the hard way that no country alone can tackle a crisis of this scale. Globalised markets and financial systems do not permit anyone to exist in isolation.

It made countries around the world understand that they had to work together.

They needed international standards to make the financial system more resilient and stable. The message was clear: global finance needs global rules.

Our stability and security depend on it.

In the financial sector, the days of excessive risk-taking and taxpayer bailouts are now behind us.

Europe has strengthened its banking rules. Globally, we have reached agreement on Basel III to finalise the post-crisis reforms of banking regulation.

We achieved all this through countries working together.

Putting these global financial rules into proper effect will demonstrate our commitment to multilateralism and international regulatory cooperation.

To quote Jean Monnet, one of the EU's founding fathers:

“Make men work together; show them that beyond their differences and geographical boundaries, there lies a common interest.”

Today, however, the spirit of common interest advocated by Monnet - the essence of multilateral cooperation - is under threat. There is a clear geopolitical shift as new countries and regions gradually assume new dominance.

The world is turning more multi-polar, uncertain and confrontational.

Escalating trade tensions weaken the outlook for the world economy.

In the midst of the uncertainty, the European Union should act decisively: by defending and promoting a fair, rules-based multilateral system.

We rely on it for our standing in global finance. So does the EU's economic power, since our financial system is deeply integrated in the world economy.

As Executive Vice President-designate of the next Commission, I will be charged with strengthening Europe's economic sovereignty to uphold the EU's prosperity, security and values.

Over the next five years, we must make the most of the EU's economic and financial influence to advance our interests globally.

Ladies and gentlemen

Boosting Europe's geopolitical role means that we should put the policy positions that we defend globally into practice domestically.

There is no doubt about it: if we are to maintain credibility, we lead by example.

I am thinking of areas such as the fight against climate change, free and fair trade, international taxation, sustainable finance and setting global standards.

Above all, Europe cannot successfully play a key global role without further deepening the Economic and Monetary Union. This remains a top priority.

While there has been much progress in the last five years, the EMU needs more reform to shield the euro area from large economic downturns.

This is strategically important for several reasons:

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  to project the EU's economic weight;

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  to affirm its economic sovereignty;

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  and to strengthen the international role of the euro.

The euro is a strategic asset for the EU.

Around 60 countries either use it, or link their currency with it. It is consistently the second most used currency, in payments and in global reserves. However, its international use has not yet returned to where it was before the financial crisis.

To close the gap, the euro must acquire the key support features that underpin a reserve currency.

This includes a financial system that is large and sophisticated enough to guarantee the liquidity of the currency and related assets, along with a stable and efficient by functioning economy.

For that, a deep and liquid European capital market is vital.

This brings me to the Capital Markets Union, where we will be doing further push during the next Commission's mandate.

That goes for the Banking Union too.

We have made a lot of progress with the CMU. But there is much more to do.

I aim to speed up the work to diversify sources of finance for companies and tackle barriers to the flow of capital within the EU.

As one example, I will propose a new fund to help our SMEs go public. I will also work with my colleague Margrethe Vestager on the comprehensive SME strategy where providing - or improving access to financing for SMEs will be of paramount importance.

We should also think of ways to promote greater retail investor participation in capital markets, and develop integrated and efficient capital market infrastructure.

I welcome the strong political support that many Member States are giving to this project.

And to make sure that our work is comprehensive, targeted and enjoys broad sector support, I think we need to reflect with stakeholders about long-term trends affecting where we go next with this flagship project.

We will bring together experts from industry and civil society to discuss all this in a High-Level Forum on Capital Markets.

Ladies and gentlemen

I mentioned Europe's leadership through putting its global priorities into practice domestically.

The fight against climate change illustrates the great potential of what we can achieve on the international stage.

Yes, our objective is to generate economic growth. But that growth must be sustainable, to preserve and protect our natural world as much as possible.

The next European Commission aims to move Europe to a climate-neutral economy by 2050 and become the world's first major economy to do so.

Setting an example like that will not happen overnight - and will not be cheap.

We quickly recognised that the financial sector had to help attract private capital, by investing in economic activities that mitigate and adapt to climate change.

Public money will simply not be enough.

The EU was an early mover in sustainable finance, the first region to enact hard law in this area.

We have already agreed disclosure rules for financial market participants, and climate benchmarks.

Negotiations are proceeding on an EU classification system, or taxonomy, to define which economic activities are sustainable. Actually, we know that some potential participants of this event are currently negotiating taxonomy in trialogues. So we hope for agreement by the end of this year.

Under the European Green Deal set out by President-elect von der Leyen, the new Commission will put sustainability at the core of its fiscal, economic and financial policies.

So, when we coordinate the fiscal and macroeconomic policies of EU countries, sustainability will feature prominently.

EU funding programmes are another example where a shared vision is necessary. We have incorporated sustainability across all EU policy areas to make sure that it will benefit from at least 25% of our next long-term budget.

The Green Deal's investment pillar - the Sustainable Europe Investment Plan - aims to generate €1 trillion in investment over the next decade.

We will work with the European Investment Bank to ensure that at least half of its financing will be dedicated to climate action projects by 2025.

Taxation, carbon pricing and subsidies can help to set long-term signals to guide investors towards sustainable investment and steer changes in the behaviour of companies and households.

The work we began on green finance three years ago must continue.

We will move from greening finance to financing green.

The political context has changed: we have to react quickly and accordingly.

I plan to present an updated green financing strategy in the first half of next year, after consulting widely.

On the reporting side, firstly we will propose measures in the EU's Non-Financial Reporting Directive, and ask companies to give sufficient and reliable information on their sustainability risks and opportunities.

Here, I would like to thank Mike Bloomberg for his continuous support for our green finance action plan.

As he has said: “Increasing transparency makes markets more efficient, and economies more stable and resilient.”

Then, we should consider how best to involve larger parts of society to invest in green financial products, for which there is clear demand, particularly from young people.

For retail investors, we plan to make it easier to identify sustainable investments.

Once completed, the EU taxonomy will act as the foundation for an EU green bond standard and EU ecolabel for retail investment products - also possibly for other financial products in the future.

Raising energy efficiency in housing is another area that needs attention.

Buildings are the EU's single largest energy consumer.

But around 35% of them are over 50 years old and almost 75% of the building stock is energy inefficient.

Our next step will be to explore standards and labels for green mortgages and green loans to help owners upgrade their houses.

Lastly, we will see how to improve management of climate and environmental risks within our financial system - and how the financial sector strengthens its resilience against them, especially against the physical risks that arise from natural disasters.

That will mean assessing whether we need to make any regulatory changes to ensure better reporting and monitoring of climate-related risks.

We will also be looking at ways to integrate sustainability risks into financial stability monitoring and supervision mechanisms, like stress testing and scenario analysis.

Ladies and gentlemen

Sustainable finance is a good opportunity for the EU to lead globally based on what it does at home. In Europe, we are well on the way to scaling up sustainable finance.

But, on its own, that is not enough. Because Europe is generating only about 4% of global emissions.

Climate change, and often environmental degradation, do not respect borders.They affect us all.

And the lack of green and sustainable investment is a worldwide issue.

What would really help to scale up sustainable finance to the extent that the world needs is close international cooperation.

The EU aims to be at the forefront of coordinating international efforts towards building a financial system that supports sustainable growth globally.

How do we do it? By working together with public and private initiatives, between institutions and countries.

That is why we proposed the International Platform on Sustainable Finance, launched last month in Washington.

It is open for any like-minded country to join, to exchange best practices and coordinate approaches on environmentally sustainable finance. In that spirit, we look forward to working with the Task Force on Climate-Related Financial Disclosures.

Ladies and gentlemen

Developing sustainable finance is critical to the long-term competitiveness of the EU financial and banking sectors.

Europe has the potential to build itself into a centre of expertise to attract rising numbers of investors keen to place their funds and savings in green investment options.

This is an opportunity that we have to seize.

And we should do it quickly: this sector is turning highly competitive. Europe could become the home for the main international hubs for sustainable finance.

The more Europe succeeds in being a global leader on sustainability, the more it will succeed in attracting green and sustainable financial inflows.

That will generate even more growth and jobs, for everyone's benefit.

Thank you.

SPEECH/19/6229