07 June 2021

DG FISMA: Staff working document – Monitoring progress towards a capital markets union: a toolkit of indicators

The Commission announced in the 2020 Capital Markets Union (CMU) action plan2 that it will complement its regular reporting of progress on legislative and non-legislative action with monitoring of how EU capital markets are evolving towards the CMU, based on a set of targeted indicators.

 In the 2020 December Council Conclusions on the Commission’s Capital Markets Union Action Plan, the Council further stressed the importance of developing clearly defined and adequate indicators3. Various reports prepared in the run-up to the 2020 CMU action plan4 and the European Court of Auditors recommended the Commission establishes indicators to track progress with CMU5. By developing a tool kit of indicators, the Commission services are responding to the Council’s request and the recommendations of the European Court of Auditors. While the European Parliament’s own initiative report on the CMU does not suggest the creation of an explicit monitoring tool, it identifies various fields in which enhanced monitoring is warranted6.

This staff working document introduces and explains a set of indicators that the Commission services will use to monitor progress towards accomplishing the objectives of the CMU. By tracking overall progress towards the key CMU objectives, the CMU indicators will complement evaluations and impact assessments of individual measures under the CMU action plans. In contrast to the CMU indicators, these reviews provide a targeted 5
of the effectiveness, efficiency and coherence of individual measures, based on the available quantitative and qualitative information.

The indicator set builds on the experience drawn from earlier work on the CMU indicators that aimed to track the development of capital markets, as well as on the results of an external study that analysed the work done by academics and think tanks on measuring progress on capital market development. The Commission envisages updating the indicators once per year. As indicators are sensitive to factors other than the effects of new legislation, in particular to economic cycles, financial turmoil and geopolitical developments, the interpretation of annual changes in the indicators will require caution. Nevertheless, the publication of the CMU indicators is timely, as the impact of the first CMU measures7 becomes gradually visible in data. This staff working document seeks to explain the motivation behind, and the meaning and caveats of, the selected CMU indicators.

The purpose of the CMU indicators is threefold:
 monitor progress towards the CMU objectives;
 provide a framework for the analysis of capital market development and an empirical basis for future analysis of the overall impact of past CMU measures; and
 help identify the areas where existing policies may need to be adjusted or new policies may need to be developed.

In the development of the CMU indicators, the Commission relied on the results of the study, commissioned in 2019 from London Economics Europe (hereinafter ‘LEE (2020)’). The contractors were asked to propose both the indicators that would assess progress towards the ultimate CMU objectives (output indicators) and the indicators that would provide insight into the factors that policies could influence (input indicators). The contractor had to: (i) identify possible existing indicators based on a review of the relevant literature; (ii) discuss their suitability with academics, market participants and other stakeholders; and (iii) analyse systematically statistical, theoretical and empirical properties of the data. Based on this work, the contractors were to suggest a list of suitable indicators. This study has now been completed and published on the Commission’s website8. It provides a selection of the indicators, supported by empirical evidence consistent with the CMU objectives.

This staff working document presents the selected CMU indicators based on the results of the study and further analysis by the Commission. The indicators should: (i) strongly relate to the CMU objectives; (ii) be ideally available for all EU Member States; and (iii) cover the period since 2015. This CMU indicator set will be dynamic to allow for future integration of new indicators, especially with regard to green and digital finance, once data become available.assessment

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