Italian Finance and Economy Minister Pier Carlo Padoan has called for corporate governance to be at the heart of the European Commission’s ambitious ‘Capital Markets Union’ plan to mobilize non-bank finance to boost the European economy.
The plan, still very much at the development stage, is a key initiative of new European Commission President Jean-Claude Juncker. The broad idea is to create a non-bank system with echoes of the EU’s banking union single rulebook.
“A sound corporate governance framework is crucial in market based finance,” Padoan told the European Corporate Governance Conference in Milan this week. “Therefore in pursuit of a capital market union, a robust and sound corporate governance framework must prevail” to enhance the stability of the EU’s financial system.
Padoan, an economist who became finance minister in the government of Matteo Renzi earlier this year, posited a “single framework” for ownership rights. Delegates to the event agreed that the ‘buyside’ community had an opportunity to help frame the emerging policy. As one observer said, the EU knows all about union but “nothing about capital and nothing about markets”.Also speaking at the event, held on the former trading floor of the Borsa Italiana stock exchange, was Ugo Bassi, Director for Capital and Companies at the Commission’s Internal Markets Directorate.
“A sound corporate governance framework is crucial”
Bassi, who is changing department amid a reshuffle of posts when the new Commission takes office on November 1, was even clearer about the “fundamental role” corporate governance will have to play in the capital union.
“One of the main tools,” he said, would be “deeper harmonization of corporate governance rules” across all 28 member states. He acknowledged the idea – “a single rule book or something that looks like it” – was something that “not everyone will like”.
But he argued it was vital for growth and to attract capital. “The price will be more legislation,” said Bassi, a lawyer who has overseen alternative investment and asset management in his time at the Commission.
The capital markets union brief will be handled by the UK’s Jonathan Hill, the former PR executive and lobbyist.