New rules improve investor confidence and financial stability
The Irish Presidency has secured another major step forward in making European companies more transparent in their activities around the world as well as improving investor confidence and financial market stability.
The new rules, in the Transparency Directive, were agreed among Member States in Brussels today following a deal struck by the Irish Presidency with the European Parliament.
These rules will apply to all companies listed on EU exchanges, including extractive industries such as mining, forestry, oil and gas companies. This builds on new measures to encourage greater transparency among large non-listed companies, secured earlier this year by the Irish Presidency.
Welcoming the new rules, the Minister for Finance, Michael Noonan, said:
"These new rules will encourage European companies to be more open about what they are paying to governments around the world. I believe that more transparent and more socially responsible companies will be better able to contribute to job creation and economic growth in Europe. Stability, jobs and growth are the key objectives of the Irish Presidency."
By removing the burden on all listed companies in the EU to publish quarterly reports it will help stabilise financial markets as quarterly reporting is associated with high price volatility and can lead to firms targeting short term profitability rather than long term growth.
Minister Noonan - "These measures along with the new rules in the recently agreed accounting directive have the potential to save European SMEs up to €1.7bn per year."
The Minister said:
"These new rules will boost investor confidence and removes the perverse incentives created by short term reporting requirements; companies can now focus on long term growth rather than the demands of analysts to demonstrate profits each and every quarter. Furthermore, by reducing the burden on all issuers, it is hoped that it will encourage Small and Medium firms to access the capital markets as a source of funding to grow their business. These measures along with the new rules in the recently agreed accounting directive have the potential to save European SMEs up to €1.7bn per year."
The new rules agreed today
- introduce a new system of country-by-country reporting for extractive industries (companies involved in mining, oil, gas etc) who will now have to present more detailed information on any payments they make to Governments, broken down per country in which they operate, rather than at a global level
- reduce administrative burdens for listed companies, including small and medium-sized issuers
- will prevent the secret building up of a holding “hidden ownership” by requiring the disclosure of holdings of a wider range of instruments including swaps, futures, contracts for differences and other cash settled derivatives.
This Transparency Directive is part of a wider Single Market package aimed at reducing red tape for European SMEs and encouraging more socially responsible business.
The new legislation will now be finalised before entering into force later this year.