EU unveils push for non-bank lending to end slump

Brussels: The EU`s financial services chief unveiled a wide array of measures Wednesday to encourage non-bank lending across Europe in a bid to reboot slumping investment that is threatening economic growth.

The so-called Capital Markets Union plan comes as only a about a third of business lending in the EU comes from the non-banking sector, such as stocks and bonds, far short of the 70 percent in the United States.

"I want the Capital Markets Union to help European businesses... have a wider range of funding sources," said Britain`s Jonathan Hill, the European Financial Services Commissioner.

"I want to knock down barriers to make it easier for capital to flow freely across all 28 member states," he added.

The reforms proposed by the EU`s executive arm are an effort to break the dependency on Europe`s banks that slashed lending in the wake of the financial crisis brought on by the fall of Lehman Brothers in 2008.

The commission believes that the lack of options has also siphoned off venture capital and denied Europe its own Silicon Valley capable of creating tech giants to compete with Facebook or Google.

The first concrete step in Hill`s proposal is a framework for reviving the so-called asset backed security market.

This entails banks repackaging loans to individuals and small businesses -- such as car loans or mortgages -- into one financial instrument that can then be sold on to major investors.

Hill also issued a proposal on attracting finance in long-term investment projects in conjunction with the EU`s ambitious investment plan, a key policy of Commission head Jean-Claude Juncker.

The proposals were widely welcomed by the financial sector, who will seize the opportunity to push the EU to ease up on financial regulation that was introduced to fight the crisis.

"The European Commission is finally putting the post-crisis phase behind it and looking at ways to deliver real business-led growth and the flow of capital across Europe`s borders," said European parliament member Kay Swinburne of the conservative ECR group.

But critics warned that the proposals relied too closely on reviving the supply of credit without addressing "the root causes" of the lacklustre economy in Europe.

"While the debate on capital markets union focuses exclusively on how to finance the economy, an equally important debate is needed on what we finance," said a joint statement by unions and activists, including the powerful European Trade Union Confederation.