I just came back from the OECD Financial Roundtable meeting on «Bank deleveraging, the move from bank to market-based financing, and Small & Medium-sized Entreprises financing»
The roundtable was chaired by Malcolm Edey, Assistant Governor, Reserve Bank of Australia, and Chair of the Committee on Financial Markets.
The OECD Financial Roundtable is an informal dialogue of the OECD Committee on Financial Markets with selected private financial sector representatives and takes place prior to the biannual regular meetings of the Committee that brings together about seventy officials from OECD central banks, finance ministries and other financial authorities and to review structural, institutional, regulatory and market developments. The Financial Roundtable allows for an off-the-record discussion between Committee members and (about fifteen to twenty) selected representatives of the financial services sector.
I made brief comments, recommending that we discuss not only debt, but also equity financing:
Innovation is an important factor in competitiveness, and innovation often comes from young companies. These startups need to be financed. Business angels are important for company survival. We are quite late on that front in Europe. Wealthy individuals should be encouraged to invest directly. Three weeks ago, the U.S. even went further and legalized startup crowdfunding through the JOBS Act. Startups can now raise up to $1 million per year from small investments online and through social media. It is obviously too early to tell what kind of impact it will have on the SME ecosystems, but it is interesting.
Then I made two proposals to the officials from OECD central banks, finance ministries and other financial authorities:
Expand capital gains deductions to all cash equity investments in SMEs, and limit tax credits to the investments that are focused on companies in the seed phase.