On 21 and 22 September 2017, the 5th SAFE Summer Academy, entitled “Developing Capital Markets in Europe”, was held in Brussels at the Representation of the State of Hessen. Jan Pieter Krahnen, Program Director of the SAFE Policy Center, welcomed more than 50 participants, representing institutions involved in the legislation and implementation of financial markets regulation: the European Commission, the European Parliament, European regulatory and supervisory institutions, national ministries of finance and economics as well as the European Central Bank (ECB) and national central banks.

This year’s SAFE Summer Academy dealt with different aspects that impact capital markets’ development in Europe. The agenda on the first day focused on pension and life insurance schemes and their impact on capital markets in Europe.

Monika Bütler, Professor of Economics and Public Policy at the University of St. Gallen, opened the first topical session with a short presentation on the theoretical and empirical aspects of pay-as-you-go and fully funded pension systems. Bütler highlighted potential problems of fully funded systems and joined the subsequent panel session to discuss the question “Can the type of pension scheme change dynamics of capital markets?” with Jung Duk Lichtenberger (European Commission), Raimond Maurer (SAFE and Goethe University) and Martin Parkes (BlackRock). The panelists elaborated on the optimal composition between a fully-funded and a pay-as-you go system and the implications for a European capital markets union (CMU).

The second session was devoted to the “Portfolio mix of life insurances: risk sharing – defined benefits versus defined contributions”. The introductory remarks by Bernhard Scherer, Head of Central Investment Management and Head of Product Development Asset Management at Bankhaus Lampe, addressed the differences between defined contribution and defined benefit schemes, in particular when managing risks, and the reasons behind the decline of defined benefit pension products. In the following panel, Scherer debated with Nathalie Berger (European Commission), Sandra Hack (EIOPA) and Klaus Wiener (German Insurance Association) about optimal pension portfolio choice in the light of the current discussion on a pan-European personal pension product (PEPP).

The final session of the first day was devoted to two ongoing research projects on market innovations dealing with pensions. First, Andreas Hackethal (SAFE and Goethe University) presented research on so-called pensions dashboards that have the potential to support people in their retirement planning. By means of financial technology, the dashboards should make information on pensions products and plans more accessible and comprehensible for the users. Second, Theo Nijman (Netspar and Tilburg University) presented work on a new pension product that incorporates the advantages of defined contribution and defined benefit products: a personal pension with risk sharing. After introducing the main characteristics, Nijman discussed potential challenges and implications for the regulation of such a product. The day closed with the dinner speech “Just finance? – Rawls and Rent-seeking regulation in the EU” by Hartmut Kliemt (Frankfurt School of Finance and Management) that highlighted the philosophical dimension of financial markets and regulation in Europe.

The second day of the SAFE Summer Academy focused on the integration of financial markets. It started with a keynote by Rainer Riess (Federation of European Securities Exchanges) which stressed the importance to strengthen Europe’s position in global capital markets. Riess pointed out that European capital markets should foster economic growth by supplying investment, financing and risk management services.

In the subsequent session on “the future of market supervision architecture in Europe” Reza Moghadam (Morgan Stanley), Elisabeth Roegele (BaFin), Jan Pieter Krahnen (SAFE and Goethe University) and Mette Sicard Filtenborg (ESMA) discussed the necessity of an integrated European market supervision performed by a single authority similar to the U.S. Securities and Exchange Commission (SEC). Sicard Filtenborg kicked off the highly topical discussion by summarizing the major aspects of the European Commission’s proposal to create a stronger and more integrated European financial supervision. The proposal was published only two days earlier and calls for a much more powerful supervision at the European level, though in close cooperation with the national authorities. Reza Moghadam stated that, in fact, the UK’s supervisory authorities have so far assumed the role of a European SEC since the European capital market is currently based in London. However, with a view to UK’s pending withdrawal from the European Union, this is going to change and Brexit will probably lead to a fragmented situation either way.

In the final session of the Summer Academy, the participants prepared and presented own suggestions for a roadmap towards dynamic capital markets in Europe to an expert panel composed of John Berrigan (European Commission), Philippe Lamberts (European Parliament) and Thomas Wieser (Economic and Financial Committee). The suggestions included i. a. the creation of more pan-European investment opportunities, the development of a single European insolvency regime, the strengthening of the supervisory institutions and the design of a level playing field for FinTechs. The panel found most suggestions very valuable but also pointed out the difficulty to implement some of the proposals given the current political situation in the EU.