EU Parliament agrees to boost liquidity for start-ups, with €6bn for job growth

6 Apr 2017

Plenary hall of European Parliament. Image: Ikars/Shutterstock

A raft of new measures have been introduced to help start-ups access diverse sources of capital, create a level field for investors and tackle youth unemployment.

The EU has introduced new rules that will increase liquidity for start-ups and SMEs, as well as protecting investors.

Yesterday (5 April) the EU passed new rules to make money market funds (MMFs) more resistant to crises and market turbulence. MFFs supply easily accessible liquid assets to start-ups and SMEs but, in the past, have been vulnerable to panic runs on their money.

‘€6bn will provide additional support for SMEs, research, [and] Erasmus Plus to create jobs for young people and to enhance the security of our citizens’

To improve MFFs’ stress resistance, the new rules require them to diversify their asset portfolios, invest in higher-quality assets, meet liquidity and concentration requirements, and have sound stress-testing processes conducted at least quarterly.

“The key aims of preventing future systemic risks and runs on funds have been addressed,” said rapporteur Neena Gill.

The first ever revision of the MFF regime could have the impact of releasing €6bn more for jobs growth, said co-rapporteur Jan Olbrycht, MEP from Poland.

“€6bn will provide additional support for SMEs, research [and] Erasmus Plus to create jobs for young people and to enhance the security of our citizens.”

The revision will also release an additional €1.2bn to tackle youth unemployment in Europe by 2020.

“It is only a step, but a step in the right direction. However, it should have gone even further, which we will endeavour to do in the future budget negotiations”, said co-rapporteur Isabelle Thomas, a French MEP.

Plans to build a Capital Markets Union

As well as the changes to MMFs, uniform rules on information given in investor prospectuses were approved by the European Parliament, with the aim of creating a more efficient single capital market and easing small firms’ access to finance.

Under the new rules, the information that a prospectus provides must enable investors to make an informed assessment of assets, liabilities, profits, losses and rights attached to investment products.

“The prospectus is a concrete example of how we will build Capital Markets Union,” said Czech MEP Petr Ježek.

“We made the prospectus regulation more fitting for the current environment; it will benefit all issuers who want to raise funds on the market, ending the over-reliance of small firms on bank funding. The new prospectus will reduce costs and increase the readability and relevance of investor information, which will in turn improve investor protection,” Ježek said.

Plenary hall of European Parliament. Image: Ikars/Shutterstock

Updated, 10.17am, 6 April 2017: The headline of this article was amended to clarify that €6bn is being provided for start-ups and SMEs.

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years