The European Commission is to launch a three-month public consultation on how to foster the supply of long-term financing and how to improve and diversify the system of financial support for long-term investment in Europe.
The move, announced in a Green Paper published today, has been welcomed by ACCA which said the discussion was 'crucial to restore EU's growth and competitiveness.'
John Davies, head of technical at ACCA said: 'Many of the areas targeted by the Green Paper are close to ACCA's heart, such as corporate governance, accounting and corporate reporting, taxation, the role of the public sector, and especially access to finance for SMEs. We believe that new banking regulations, CRDIV [Capital Requirements Directive] in particular, could potentially risk making it more difficult for banks to finance the recovery in Europe and so we welcome the Commission's thinking on alternatives.'
'We welcome moves to promote and facilitate the adoption of a more long-termist approach by businesses, large and small. Many of the problems we currently face are the consequence of businesses paying too much attention to short-term targets and performance measures and not enough to ensuring the sustainable and long term development of the business,' Davies said.
ICAEW said the Green Paper 'asks questions about a very broad range of issues and, crucially, about how they interact with each other.' In its response, the institute also singled out the need to encourage long-term financing in order to support the large infrastructure developments and other long-term projects that are vital for economic development, but said this could not be provided by the banking sector alone.
Iain Coke, head of ICAEW's financial services faculty, said: 'Clearly, tougher capital rules for banks under Basel III and insurers under the proposed Solvency II will increase the cost and may reduce the availability of finance. A balance must be struck between the safety and security of the financial system and its ability to take on risk to support economic development.
'This should not be a debate about long or short-term finance but about how businesses and governments can access finance that matches their investment needs. There is no obvious, easy solution to the financing challenge, but more effective capital markets, more customer-focused financial services and a greater role for non-bank finance are all parts of the solution.'
