Market Gaps on Access to Finance - Bank of Valletta

Malta Business Bureau – <strong>Market</strong> gaps in access to finance
April 2013
Members States can choose from three options in terms of the development and implementation of
structural funds instruments:
(1) Creation of tailor-made instruments under shared management principles, aligned with
some common rules inspired by the EU equity and debt platforms for the EU instruments;
(2) Creation of "off-the-shelf instruments" under shared management principles which would
facilitate the set-up of instruments for Member States as well as ensure compatibility with
the EU-level instruments;
(3) Invest part of their structural funds in joint instruments, that is, compartments of EU level
instruments "ring-fenced" for investments in regions and policy areas covered by
operational programmes from which structural funds resources are contributed.
3.5.5 Improved regulatory framework for venture capital
Acknowledging its high but largely unexploited potential for the development of European SMEs,
the EC has put forward a new regulatory regime (referred to as the single rulebook) specifically
designed to channel equity funds to SMEs 87 . This new regime is aimed at enabling EU VC funds to
market their funds and raise capital on a pan-European basis across the Single <strong>Market</strong>, reducing
fragmentation of the venture capital markets along national lines that prevent cross-border
operations and limit the supply of VC through the lack of a critical mass, as is the case in Malta. The
framework’s objectives are to increase the scale of the venture capital market and lead to 88 :
(i) larger, more efficient VC funds, with more possibilities to specialise by type of
investments;
(ii) increased competition between funds and better diversification of their investments;
and
(iii) more cross-border financing available for SMEs.
The EC is also looking into the relationship between prudential regulation and VC investments by
banks and insurance companies in the light of new solvency/ capital requirements regulations. The
EC believes that a well-calibrated legislative framework for VC, that recognises in particular the
benefits of diversification, may allow for a certain amount of VC investments in a way that does not
cause prudential concerns 89 .
The EIB Group will also continue supporting the growth of SMEs through its wide range of equity
products and particularly the enlarged EIB Risk Capital Mandate. Further cooperation between the
EIB Group and the EC, including risk-sharing arrangements, will be developed in order to facilitate
the mobilisation of additional public and private resources 90 . The EIB Group has also increased its
Risk Capital Mandate to enable it to extend the scope to include co-investing with business angels.
87
European Commission (2011), An action plan to improve access to finance for SMEs
88
European Commission (2011), Regulation of the European Parliament and of the Council on European Venture Capital
Funds
89
Ibid, pgs. 3-4. The European Banking Authority has also proposed a reduction in the prudential SME risk-weighting to
alleviate the potential impact of the stricter capital requirements for SMEs (European Banking Authority (2012), Assessment
of SME proposals for CRD IV/CRR).
90
European Commission (2011), An action plan to improve access to finance for SMEs, pg. 11
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