ECMI Roundtable on the Mid-Term Review of the Capital Markets Union Action Plan

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At present, capital markets have attained different stages of development throughout Europe, and matching of supply and demand on a cross-border basis is still uneven. Strengthening the longterm savings and investment channel through well-functioning, deeper and highly integrated capital markets remains a priority. This would then lead to more alternative financing sources for companies, better options for retail/institutional investors, and enhanced market-based, private risk-sharing mechanisms. In particular, although there are some signs of change in internal markets, notably in debt instruments (corporate bond issuance and private placement of small debt), which are very useful for project financing and longer-term maturities for corporates, Europe is still struggling with equity issuance (pre-IPO and IPO).

Despite Commission’s efforts (especially for venture capital and asset managers), there is a need to make it rewarding and interesting for the suppliers of capital (e.g. institutional and retail investors). Importantly, capital markets should become useful to banks in terms of meeting refinancing needs, for example using covered bonds and other instruments to fund their loans and bank balance sheet management (through securitisation). A big chunk of the Commission’s work is dedicated to the development of a secondary market for NPLs, however, various frictions, such as tax and legal barriers, inhibit progress.

In conclusion, Capital Markets Union will not be completed in the next few years; there is no finish line in capital markets construction and there always be a next step. CMU is a more complex and challenging process that Banking Union: it is more eclectic, more diffuse and a lot harder to communicate and sell.