The European Commission (EC) has insisted that the implementation of the Capital Markets Union (CMU) will still go ahead, despite the resignation of Jonathan Hill, the UK commissioner responsible for the portfolio, following the UK’s vote to leave the EU.
Former Latvian prime minster and current vice president for the Euro and Social Dialogue, Valdis Dombrovskis, will take over the portfolio of the CMU action plan following Hill’s resignation, announced Saturday, 25 June, just 24 hours after the EU referendum vote was announced.
“I wanted it to end differently and had hoped that Britain would want to play a role in arguing for an outward-looking, flexible, competitive, free trade Europe. But the British people took a different decision, and that is the way that democracy works,” Hill said in a statement published on the EC website.
Immediately following Hill’s announcement, the EC confirmed that Dombrovskis will step up and take over the Financial Stability, Financial Services and the Capital Markets Union portfolio.
Dombrovskis is the former prime minister of Latvia, a role he held between 2009 and 2014. Afterwards, he was a member of the European Parliament (MEP) and then later took up the role of EC vice president for the Euro and Social Dialogue.
“The work of the EU must go on,” said EC president Jean-Claude Juncker. “With his [Dombrovskis] experience, expertise and good network among MEPs, finance ministers and prime ministers, vice president Dombrovskis is ideally placed to ensure continuity.”
The EC announced the CMU action plan last September. A key component of the plan was to increase the number of alternative lenders in the Europe in order to help mid-market companies seek financial assistance as the banks continue to retreat from providing funding.
In April, the European Securities and Markets Authority published a report on what a harmonised regulatory framework should look like if adopted. Important concerns included the idea that alternative investment funds originating loans should be set up as closed-ended vehicles without the right to redemption of units and that credit should be provided to ensure that risk is mitigated and is no higher than that posed by bank lending.
James Newsome, managing partner at Arbour Partners, said that the most disappointing aspect about Brexit was that the UK voice in the CMU action plan is now lost. “For those countries in the Eurozone that want to integrate further, British commissioner Hill has left a tremendous blueprint for how that can happen in the private capital markets.”
But on a more positive note, Newsome said that the UK has the “best legal system for private debt funds to operate in and that ultimately the song remains the same”.
“The fundamentals are there and we have an excellent skill base. Investors will continue to allocate funds to the private debt market as long as we avoid a recession,” he added. Additionally, Newsome said that long-term the UK market may benefit as a result of a more global approach as India has already signalled an interested in a closer partnership with Britain as a result of Brexit.