BRUSSELS (Reuters) - The EU's new financial services chief pledged on Thursday to set out his plans for a pan-European capital market by the middle of next year, aiming to reduce companies' reliance on banks and help revive the bloc's fragile economy.
Jonathan Hill, the European Commissioner for financial services, said he was seeking to create an integrated capital market over the next fives years and would develop a plan by next summer following a public consultation.
"We still do not have a fully functioning single market for capital," Hill told a conference of EU officials and business leaders. "I will be bringing forward proposals to deliver a capital markets union; a project for all 28 EU Member States."
Channeling more money into small companies is seen as crucial for Europe's efforts to avoid economic stagnation because small and medium enterprises provide two out of every three private sector jobs in the European Union.
Following the worst financial crisis in a generation, banks are reducing riskier lending, a problem in a continent where banks account for 80 percent of corporate loans.
A capital markets union would mean the EU moving beyond public subsidies and loans to coordinate financing for companies and infrastructure through project bonds, public-private partnerships and infrastructure funds.
Hill said his first steps would be to push a proposal for European long term investment funds for infrastructure and businesses, to develop a framework for securitization and to carry out analysis of private placements - the sale of securities to a small number of chosen institutional investors.
"I am interested in ideas for more market finance instruments – but not just in safe short-term debt, but in longer term stable debt that encourages long term investment, and in real risk capital that encourages innovation."
The European Central Bank is at the heart of wider efforts to create a capital markets union by trying to revive securitization, or the bundling of loans into bonds to raise cash for companies to invest.
(Reporting by Robin Emmott)