Writing in the Financial Times on 9 March 2015 Wolfgang Munchau, the European economic columnist described how it will become very difficult for the German and Austrian Life industry, which sells insurance products and annuities with guaranteed returns, to remain solvent if they keep investing only in government and corporate bonds in a zero interest rate deflationary economy which is busily printing money. This is the slow moving train wreck which is more likely to lead to the next big financial crisis than worrying about a theoretical (though highly unlikely) exit of Greece from the Euro.

In anticipation of the difficulties ahead German insurers have apparently begun to diversify into other assets such as property or private equity.

And in February this year the European Commission published its green paper on ‘Building a Capital Markets Union’ in which Europe’s priority is now seen as jobs and growth with the EU’s task being to link investors and savers with growth.

This is a long term project but one which is seen as being more pressing than ever and early progress is intended.

I cannot say whether there is a direct connection between the plight of Mitteleuropa’s financial sector and the new rules being ushered in as regards financial promotion but this year’s annual report from the EIB calls for financial market reform to encourage better provision of risk bearing finance for young innovative firms and other innovation activities, including through venture capital, high quality securitisation and greater use of credit guarantees.

These new initiatives should provide a number of opportunities for innovative EIS Fund Managers to raise significant amounts of additional capital; particularly if their EIS funds are structured in way which responds to a traditionally conservative approach to EU investing and which can also win the right to carry the new kite marks of EU assurance, in particular the kite marks of EuVECA and ELTIF status which are being developed.

In the next few months the Commission will:

• Develop proposals to encourage high quality securitisation and free up bank balance sheets to lend;

• Review the Prospectus Directive to make it easier for firms, particularly smaller ones, to raise funding and reach investors cross border;

• Start work on improving the availability of credit information on SMEs so that it is easier for investors to invest in them;

• Work with the industry to put in place a pan European private placement regime to encourage direct investment in smaller businesses; and

• Support the take up of new European long-term investment funds to channel investment in infrastructure and other long-term projects.

The rules governing financial promotion are about to change and from the new sunny uplands of EU policy the aim is to

‘simplify the laws and reduce the red tape faced by managers of venture capital funds so they can easily raise capital across the whole of Europe and so better invest in European SMEs. Instead of having to comply with 27 national laws, they will be subject to a single and simplified regime. This will greatly facilitate their daily business while still ensuring that they are properly supervised.’

Hoorah!