New ‘Finance Europe' label aims to channel retail savings

The Star

3 days ago

French Economy Minister Eric Lombard. — Bloomberg
PARIS: A group of European countries is teaming up on a new initiative to help funnel more savings into the continent's economy, as the region tries to accelerate progress on integrating and deepening its capital markets.
Officials including French Economy Minister Eric Lombard and his Spanish counterpart Carlos Cuerpo were scheduled to sign an agreement in Paris yesterday for a label called 'Finance Europe' that would apply to certain products targeting retail investors, according to a statement by the French Economy Ministry.
The initiative is part of an effort to deepen the region's financial markets, as the European Union tries to break a deadlock in its decade-old plan for a capital markets union.
With room for fiscal spending limited in much of Europe, tapping savers is key to help fund the economy and boost the region's competitiveness.
France, Spain, Portugal, Germany, Luxembourg, the Netherlands and Estonia are the first countries to join the initiative, which comes against the backdrop of a global trade war that has already fueled capital reallocations.
To qualify for the 'Finance Europe' label, investment products must have at least 70% of assets in the European Economic Area, primarily in equities. They must also include an incentive for long-term holding, such as a lock-up period.
Each country will decide separately on potential tax incentives for savings products under the new label, which will be distributed by banks, asset managers and insurance companies.
Thomas Richter, the head of Germany's asset management lobby BVI, cautioned that products sold under the new label may not be suitable for all retail investors.
He also expressed doubt that governments will commit to meaningful tax incentives to promote the products.
'Bringing more people to the capital markets and financing the European economy is a worthy goal,' he wrote by email.
'However, this label cannot be aimed at inexperienced savers, given that it permits investments with low liquidity, among other things.
'It is also unsuitable for retirement provision, as the narrower investment universe leads to lower return opportunities in the long term.' — Bloomberg