| Author (Corporate) | European Commission |
|---|---|
| Series Title | COM |
| Series Details | (2016) 461 final (14.7.16) |
| Publication Date | 14/07/2016 |
| Content Type | Policy-making |
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This proposal should be seen in the broader context of work to unlock investment in growing and entrepreneurial businesses. The Investment Plan for Europe provides a comprehensive strategy to promote jobs, growth and investment. A key strand of the Investment Plan is the Capital Markets Union (CMU) Action Plan, which aims to reduce fragmentation in the capital markets, remove regulatory barriers to the financing of the economy and increase the supply of capital to businesses through establishing a genuine single capital market. The Investment Plan for Europe aims to further mobilise additional private investment using public funds through the European Fund for Strategic Investment (EFSI). In this framework, to catalyse private investment into venture capital markets in Europe, a Pan-European fund-of-funds investing in European venture capital is also being established. This will combine private sector capital with support from the EU to attract capital from major institutional investors to the European venture capital asset class and boost the impact of EU support for the European venture capital industry. The European venture capital funds (EuVECA) and European social entrepreneurship funds (EuSEF) fund structures were created to offer new opportunities for market participants to raise and invest capital in innovative small and medium-sized enterprises (SMEs) and social undertakings throughout Europe. SMEs are of great importance to the EU economy as a sector that can generate real growth and returns. While EuVECA funds support young and innovative companies, EuSEF funds focus on enterprises whose aim is to achieve positive social impact. The source and the availability of financing for an SME are important factors behind its development, growth and success. In order to promote new areas of growth and move towards an innovation-led economy, there is a need to strengthen new avenues of financing to support start-ups, innovative SMEs and social enterprises. Since banks are typically in a less strong position to provide these types of financing, access to venture capital and social entrepreneurship capital is key to financing the growth of this segment of the EU economy. The gap in such funding has been cited repeatedly as an obstacle that needs to be addressed in order to promote EU economic growth. The EU is also falling further behind the US in terms of the venture capital market, rather than catching up. Despite a similar size of economy, the United States provide more risk capital to companies, including SMEs. The CMU Action Plan reported that if the EU venture capital markets were as deep as in the US, as much as €90 billion of funds would have been available to finance companies between 2009 and 2014.In 2014 around 90% of all EU venture capital investments were concentrated in eight Member States: UK, Germany, Sweden, Denmark, Finland, the Netherlands, France and Spain. But even in these more developed markets, venture capital represents less than 0.1% of GDP. In order to further support the development of these markets, the Commission is seeking to ensure that the EuVECA and EuSEF frameworks work as well as possible in supporting venture capital and social investment. The Commission therefore decided to anticipate reviews required under both Regulations in 2017 by starting a legislative review as part of the 2016 Regulatory Fitness and Performance programme (REFIT) initiative. The aim of the review was to assess how the two frameworks have performed so far, in particular whether they have been effective, efficient, coherent, relevant, and have brought added value to the EU. The review identified a number of factors holding back the development of these funds, in particular the rules that govern the way the funds invest in assets, the way the managers run the funds, how both Regulations interact with other existing investment fund laws and the requirements funds comply with to benefit from the passport across borders. This Proposal recognises that there are still other factors outside its scope which are holding back the development of venture capital sector in the EU, such as approach to non-bank finance or tax regimes which should be addressed through other dedicated initiatives by Member States. Moreover, these factors will also be addressed in the CMU Action Plan's comprehensive package of measures to support venture capital financing in the EU. |
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| Source Link | Link to Main Source http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=COM:2016:461:FIN |
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| Subject Categories | Business and Industry, Internal Markets |
| Countries / Regions | Europe |
