Capital markets union : unlocking SME financing within the European Union

Abstract

The 2008 financial crisis resulted in banks reducing their lending resources in an effort to stabilise the economy. This particularly impacted small and medium sized enterprises across Europe as they lacked collateral to secure capital financing. In order to unlock financing for SMEs the Commission proposed the setting up of the Capital Markets Union in an effort to push capital markets across the European Union as an alternative financing mechanism to bank financing. Chapter One analyses the current state of capital markets within the European Union and how they compare to those found in the United States. The European Union’s effort at increasing financial integration across capital markets found in different Member States is discussed. Different legislative policies introduced by the European Union in order to further connect capital markets are also analysed. Chapter Two initially explains the reasons for lack of financing for SMEs and how banks can help and not hinder the development of capital markets for SME financing. Different alternative financing mechanisms are then discussed alongside their regulatory framework both on a European Union and Maltese level. Chapter Three examines the Prospectus Directive and goes into detail as to when a prospectus is required. A study is then undertaken in regards to the proposed Prospectus Directive and reasons are given as to why certain provisions are being suggested taking market, investor protection and SME needs into consideration. Chapter Four delves into the legal barriers that the Commission might find in setting up the Capital Markets Union. Legal barriers including Tax, Accounts, Shareholder Rights and Insolvency Proceedings are discussed, both on a European Union and Maltese Level.