This precedes the European Commission's forthcoming new Action Plan on the Capital Markets Union (CMU). It includes ten concrete policy recommendations to help advance the CMU...the introduction of a Key Performance Indicator (KPI) to monitor progress in household participation in capital markets.
The report supplements the findings of the High Level Forum[1]
on the CMU by analysing the investment behaviour of households across
25 European countries. It looks specifically at the progress made in
recent years in shifting household financial wealth from bank deposits
towards capital market instruments, namely life insurance and pension
fund products, investment funds, debt securities and listed shares.
The results reveal wide disparities across Member States, while also displaying some common elements:
- The vast majority of European households do not invest directly in capital market instruments at all.
- Countries with the lowest share of bank deposits tend to have the highest share of financial wealth held in pension savings.
- Tax
incentives play a crucial role in encouraging citizens to save in
capital market instruments and in opting for some specific long-term
investment products.
Tanguy van de Werve, EFAMA Director General commented: “As
correctly pointed out in the High Level Forum report, the EU can help
increase participation of retail investors in capital markets by
addressing outstanding issues in the area of disclosures to retail
investors. These actions will only be effective, however, if Member
States concomitantly take appropriate measures in the areas of taxation,
pension policies and financial education to encourage more citizens to
place their savings into capital market instruments. And we see a clear
need for the EU to monitor progress made at national level by using Key
Performance Indicators."
EFAMA
makes ten concrete policy recommendations in the report to help advance
the CMU goal of fostering retail investments in capital market
instruments (CMI). The recommendations focus on four areas: financial
literacy, pension policies, tax incentives and progress monitoring. To
monitor progress in particular, EFAMA proposes to use as a KPI the
variation in the 'CMI ratio', i.e. the ratio between the household
savings invested in CMI and those placed in deposits. The higher the CMI
ratio, the more households participate in capital markets. EFAMA used
this KPI to highlight in the report the progress made in fostering
retail investments in capital markets since the launch of the CMU
initiative in 2015.
The research also finds that:
- Almost
EUR 1.6 trillion could be made available to fund the European economy
and sustainable growth, if European households would reduce the share of
their financial wealth held in deposits by 5 percentage points. This
underlines the huge impact increased retail participation in capital
markets would have on the financing of European companies, while
demonstrating that households could simultaneously benefit through an
increase in the return on their long-term savings, thereby securing
better retirement income.
- The
financial wealth of European households could have been EUR 1.2
trillion higher now had they gradually reduced their share of deposits
from 41% to 30% by investing more into equity and bond investment funds
in 2018-2019.
The EFAMA Report and a collection of country statistical profiles are available elsewhere on this site.
EFAMA
© EFAMA - European Fund and Asset Management Association
Key
Hover over the blue highlighted
text to view the acronym meaning
Hover
over these icons for more information
Comments:
No Comments for this Article