23 May 2019

ECB's De Guindos - Building the EU’s capital markets: what remains to be done

The primary objective of CMU is to foster deep and diversified capital markets that provide a wide source of financing options to European companies and citizens and act as an engine for investment, innovation and growth. Vibrant EU equity markets and truly diversified cross-border debt markets would complement traditional bank lending by fostering risk-taking and investment.

Indeed, capital markets can, for instance, provide different forms of funding sources that are better tailored to firms’ needs along their stage of development. A well-functioning CMU would also complement the banking union by providing channels to mobilise the large existing pool of savings towards financing the economy. It could help facing tomorrow’s challenges, such as climate change and digital innovation.

Within our Economic and Monetary Union, more integrated capital markets can also help to cushion shocks to parts of the euro area, thereby enhancing the resilience of the euro area as a whole. From the companies’ point of view, cross-border ownership would mean that they have a wider pool of investors and potentially more stable sources of capital available for their investments. From the side of investors, diversified portfolios would help them hedge against country-specific risks. Cross-border capital markets and banks would thus provide the level of private risk-sharing we need to ensure the long-term resilience of the euro area.

In my remarks today I will argue:

First, that financial markets are playing an increasingly important role in funding the economy, but more needs to be done to foster sustainable cross-border financial integration and risk-sharing;

Second, that a revamped CMU agenda should be geared towards addressing the challenges facing Europe, such as Brexit, and ensuring that capital markets growth does not endanger financial stability;

And finally, I will highlight the important synergies that exist between the capital markets and banking union projects.

Let me conclude with two messages.

First, convincing investors and companies to venture outside their borders requires certainty and homogeneity on the regulatory conditions that apply abroad. This means that the core aspects of national policies need to be further harmonised and implemented in a consistent way to support the integration of capital and banking markets. Banks and capital markets should complement each other in channelling savings for productive uses and fostering investment in innovative firms.

Second, moving towards CMU and banking union should also reflect the ambition we have shown in our supervisory and regulatory set-up. It should support a coherent European response to new challenges such as Brexit and the development of non-bank finance. And it should not shy away from addressing gaps in our regulatory and institutional framework.

Full speech

© ECB - European Central Bank