European Single Access Point will facilitate seamless fund flows to get pandemic-hit EU economies back on track by bringing data to investors’ fingertips
Capital Markets Union, an initiative to get the 27 EU member state capital markets to operate as one, is long overdue. And the damage that the COVID-19 pandemic has caused to the world and EU economies bring more relevance to the initiative. It is in the interest of EU member states as well as other economies that funds start flowing again, and, more optimally, through initiatives that erase land borders, which is what the European Commission has been trying to achieve through the Capital Markets Union (CMU).
To this end, the EC adopted a 16-point action plan for CMU on September 24, 2020. The first point of the action plan calls for setting up a common web portal for access to financial and sustainability information of companies across the 27 member states. The EC will adopt a legislative proposal in the third quarter of 2021 to set up a European single access point (ESAP).
Capital Markets Union – Its background
The EC, under the presidency of Jean-Claude Juncker, unveiled the Capital Markets Union initiative in September 2015 to integrate the EU’s 27 capital markets and have them operate as one. Such integration was aimed at facilitating seamless investment flows across the EU for the benefit of companies, investors, and customers.
The first CMU action plan, adopted in 2015, listed 30 steps that would lay the foundation for an integrated EU capital market by 2019. Accordingly, in 2019, the EC published a progress report to show that all proposals committed to in the first action plan had been tabled.
Signaling that CMU continues to be the top priority under President Ursula Von Der Leyen, who succeeded Juncker, the EC formed the high-level forum on CMU in early 2020. The forum, comprising 28 experts and scholars, published a set of 17 recommendations on CMU in June. The EC’s new 16-point action plan on CMU is based on the high-level forum’s recommendations.
ESAP – What’s it about?
Currently, the financial and non-financial information of EU-listed companies is scattered across the bloc. Investors and other stakeholders seeking such information on several companies must visit the portals of each of the EU member states where those companies are listed. Moreover, each member state follows a different methodology of storing information, and the information each provides on its companies varies in scope and quality. With ESAP, however, all financial and non-financial information of EU-listed entities can be found on a single portal.
As per the high-level forum’s recommendations, the European Securities and Markets Authority will oversee the proper collection of companies’ data for the portal as well as ensure that the data is searchable. ESMA will also assess if the information must be made available in a machine-readable format such as XBRL, and in that case, develop a relevant taxonomy.
ESAP implementation – some technical recommendations
The following are a few technical aspects of the implementation of ESAP, based on recommendations of the high-level forum on CMU to the EC:
1) The EU Single Access Point must be devised in a way that one-click access for human users is possible and that machine-data users can automatically download information from the platform. The data fields should ensure that information is searchable by criteria such as member state of origin, sector, size, turnover range, etc.
2) The IT infrastructure of the EU Single Access Point should ensure interconnectedness of the existing European and national registers and should be devised so that in the future further repositories currently managed by other authorities or bodies – National Competent Authorities, Officially Appointed Mechanisms or European authorities – can be integrated. This would allow users, in particular investors, to have integrated access to all relevant information.
3) ESMA should establish the EU Single Access Point as quickly as possible while ensuring that the system is able to evolve in a flexible manner to cover a broader range of public information. For this purpose, the forum recommends ESMA should be provided with adequate ad hoc funds and resources.
ESAP implementation timetable
The high-level forum has set forth the following timetable for ESAP’s implementation:
European Commission must put forward a legislative proposal on ESAP in the third quarter. EC must also direct ESMA to set up an IT structure and provide the regulator with the necessary funds to deliver on the single access point.
ESMA must identify the most suitable IT structure for ESAP.
ESMA must roll out Stage 1 of ESAP by the second quarter.
Stage 2 should ideally be rolled out in this year after Stage 1 is fully operational.
EC must empower other relevant authorities to roll out Stage 3 by the second quarter.
The difficulty that SMEs in the EU, especially those based in smaller member states, face in attracting investors is tied to the lack of one single channel for reliable and comparable information.
For instance, companies complying with the ESMA’s European Single Electronic Format mandate will make available their annual reports from 2021 onwards in a human-readable as well as machine-readable format with the National Competent Authorities of their respective EU states. As things stand, however, analysts and investors have no option but to access these reports from multiple Officially Appointed Mechanisms.
This is the issue that ESAP, by virtue of being a single portal for access to financial and non-financial information of eligible EU companies, will rectify. And this is what makes ESAP the perfect first step toward Capital Markets Union.
In the digital age, where access to the right data and information is what matters, a single point of data access is bound to make a huge difference.