20 February 2020

Draft interim report of the High-Level Forum on Capital Markets Union

The report, which does not put forward any specific policy proposals yet, sets out a new vision for the future of the capital markets union and will guide the work of the Forum in the coming months.

Following the financial crisis, and building on previous progress in working towards a truly integrated internal market for financial services and capital, the European Commission launched in 2015 the Capital Markets Union initiative.

The Capital Markets Union was seen as a necessary step to complement the Banking Union and complete the Economic and Monetary Union (EMU). A genuine Banking Union relies on more risk sharing that only a genuine Capital Market Union can deliver. Robust risk sharing in the EMU requires both.

Despite some progress with the Capital Markets Union in the first five years, however, there is a feeling that much still needs to be done. Why?

First, the creation of a European Capital Markets Union aims to overcome deep-rooted, structural and long-term obstacles both at the national and at the European levels. Such an endeavour takes time and requires repeated efforts.

Second, the Capital Markets Union is a dynamic initiative that requires constant adjustment to keep it abreast of a changing economic, social and geopolitical environment.

Finally, completing the Capital Markets Union requires significant political will and courage to change that which has existed for decades. This is perhaps the most important reason why the Capital Markets Union has not been completed yet.

Up until now, Member States have expressed strong support in principle for the Capital Markets Union but have shown limited appetite to translate this into actual support during technical negotiations. In many cases, protecting Member States’ national rules and structures has prevailed over the objective of improving capital markets’ efficiency and integration. These dynamics must be reversed if Europe wants to complete the Capital Markets Union.

Completing the Capital Markets Union will require full and unwavering political backing at all levels of the political machina – including, and especially, in technical negotiations with the Council and European Parliament. This requires ambition from all parties: from the European Commission to put forward bold but practical proposals; from the Member States and European Parliament to deliver on that ambition when agreeing on those proposals; from national governments and parliaments to supplement these proposals with ambitious measures; and, finally, from the industry to see beyond purely sectoral or firm level interests.

The Capital Markets Union embodies and promotes multiple objectives that are at the core of the European Union Treaties. This makes it a structural reform that Europe needs in times of great transformation. The Capital Markets Union can deliver on its promises only with strong and immediate political support at the highest level, as well as coordination among all the European institutions to push bold reforms forward. The window of opportunities is closing, as other jurisdictions are gradually assuming a bigger role in global markets. The EU cannot miss this opportunity.

Publication of the final report is due in May 2020.

Full report

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AFME says further push needed for Capital Markets Union vision

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