Norges Bank Investment Management (NBIM) has told the European Commission that capital markets supervision should be unified at the European level as part of the bloc’s efforts to channel more savings into investments and rev up business.
NBIM said Norway’s NOK19trn (€1.65trn) Government Pension Fund Global (GPFG), which it manages, maintained a higher allocation to EU markets than their relative size internationally.
In a letter seen by IPE, the Oslo-based central bank division said: “As a long-term investor with this significant exposure across all European markets, we have a strong interest in well-functioning capital markets that facilitate efficient capital allocation and promote economic growth, and we share the concern that European markets over time have fallen behind in terms of business dynamism and the provision of new investment opportunities to institutional investors.”
NBIM, describing itself as the largest single-owned investor in EU markets, was responding to the Commission’s targeted consultation on integration of EU capital markets, launched on 15 April with a deadline of tomorrow (11 June), as part of the roll-out of its savings and investments union (SIU) strategy adopted on 19 March.
The SIU aims to boost the EU economy by improving the way the bloc’s financial system mobilises savings towards productive investments.
In the letter, signed by Malin Norberg, chief investment officer market strategies; Emil Framnes, global head of equity trading and transition; and Vegard Vik, market structure and strategy lead, NBIM cited the Draghi report on the future of European competitiveness, which it said identified three main fault lines impeding the development of an integrated European capital market.
The first was the EU’s lack of a single security market regulator and rulebook for all aspects of trading. The second was that the post-trade environment for clearing and settlement in Europe was far less unified than in the US, and the third was that tax and insolvency regimes remained substantially unaligned across Europe, according to the report.
“Capital markets supervision should be unified at a European level”
Norges Bank Investment Management
“Capital markets supervision should be unified at a European level,” the NBIM leaders said, adding that unified supervision would ensure consistent interpretation and application of regulation, reduce operational complexity and legal uncertainty, and avoid any perception of regulatory arbitrage.
They also warned that the EU regulatory regime for financial markets could create rigidities due to the length of the regulatory process and finally arrive at overly prescriptive requirements.
“Better and simpler regulation is key to facilitate capital market evolution,” NBIM added.
Regulation of trading markets should not stifle innovation, it said, adding that currently, open-access multilateral trading venues faced regulatory restrictions in competition with bilateral trading mechanisms, and that regulation also maintained arbitrary constraints on best execution for investors through so-called volume caps.
In November 2023, European Central Bank president Christine Lagarde said Europe needed its own version of the Securities and Exchange Commission in the US to replace the patchwork of national markets watchdogs, to help raise the huge amounts of money needed for the challenges the region faced.
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