The compromise reached Thursday 'between the European Parliament and Council on the text of the proposed directive on the prospectus to be published for the public offer or admission to trading, is a important step towards creating a more integrated European capital market.
The prediction is that the directive can be put to a vote next week in Strasbourg, and finally, already in second reading, the process just before the end of July. And finally, issuers of securities will be allowed to enjoy a true "European passport" and to turn to investors in all 15 (soon 25) member states after obtaining approval from a single national regulatory authority. It therefore exceeds the regime established by the Directive on the listing and from that, connected, on the prospectus regime based on a system of mutual recognition that, by providing translation full of prospects and opportunities for the country to introduce additional requirements for admission, has proved totally ineffective. The new system instead will introduce a mandatory and automatic recognition of prospectuses drawn up in accordance with the Directive.
According to the speaker of Parliament, the British Liberal Chris Huhne, is that achieved an "excellent compromise" that will "enhance competition, increase choice for investors and reduce the cost of capital for companies."
After months of stalemate - which could lead to a third reading and a complex and lengthy conciliation procedure between the Council and the Assembly of Strasburg - Representatives of the member states have accepted the amendments proposed by Parliament, and in particular the most controversial bond issuers will be able to choose the national regulatory authority to contact for obtaining approval of the prospectus. This freedom, the intention of the European Parliament, should be granted to any issue. The Council and the Commission - in particular to strong pressure from France, Italy and Spain, fearing such freedom could divert emissions on strong markets in London, Luxembourg and Frankfurt, as well as weaken the protection of investors - had proposed that the freedom of choice would be given only for issues with a single designation of more than € 5000 (representing about 60% of the total) and for the other authority would have to be that of the issuer's home. The compromise lowers the threshold to 1000 €, or to a level that is exceeded by about 95% of emissions.
According to the Federation of European Banks "freedom of choice is an important incentive for cross-border issues and thus creating a truly integrated European financial market."
The compromise is a clear victory for the City that has the ability to consolidate and reinforce its dominant role in the market for European bonds. But it is not impossible that more competition and freedom of choice for issuers and investors can open new opportunities for other markets.
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