LSE CEO: Regulators Should Promote Use Of Equities To Finance Growth
05/24/2012| 10:29am US/Eastern
The chief executive of London Stock Exchange Group PLC (>> London Stock Exchange Group Plc) Thursday urged regulators to promote the use of equities as a source of companies' financing with the ultimate goal to boost economic growth.
"Governors must reprogram economies to use equities markets to push growth," Xavier Rolet said in a speech given at a conference organized by the International Capital Market Association.
Rolet said a better risk culture for equities as a funding tool should be developed.
He argued that regulation had a role in influencing the preference for the use of debt, rather than equities, to finance companies.
"Fiscal policies induced the use of debt," he said. Since debt was tax deductible, companies were more inclined to borrow money rather than fund their operations through the issuance of equity.
"We need regulations focused on growth," which Rolet said could be achieved if regulators reduced the cost of capital, which would in turn create more jobs.
Rolet's speech comes a day after Italian banks Intesa Sanpaolo SpA (>> Intesa Sanpaolo SpA) and UniCredit SpA (>> UniCredit SpA) said they sold their entire stakes in LSE, helping to send the U.K. exchange's stock sharply lower.
"I would have done the same in their position, given the stock's good performance this year," he said. "I am sure we'll continue to have a good relationship."
-By Giovanni Legorano, Dow Jones Newswires, +39 342 7006537; Giovanni.Legorano@dowjones.com