Speech by Yves Mersch, Member of the Executive Board of the ECB, at the Morgan Stanley Global Investment Seminar, Terre Blanche, Provence. 11 June 2015
The most recently launched integration project, the capital markets union (CMU), is different. For a change, we are not dealing with an exclusive euro area project but with a genuine EU-wide project. This implies that the CMU has to be designed in a way that is compatible with the broad need of the entire European Union.
Today, I will outline the governance principles that I believe are most conducive to achieving the two main benefits of CMU, which are:
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more diversified and better functioning capital markets to finance growth; this implies creating an investment union on the supply side and a financing union on the demand side; and
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enhanced private risk sharing to increase the shock-absorbing capacity of the whole system.
A competitive market at the service of the economy
CMU is meant to empower capital markets to play their role fully in financing growth alongside the banking sector. It will do so mainly through two avenues:
First, CMU seeks to enlarge capital markets to encompass a wider diversity of financial instruments. These will be available to a larger investor base and will finance a broader range of investment opportunities.
Second, CMU aims to enhance the efficiency of capital markets, fostering their ability to allocate financial resources competitively to the most valuable investment opportunities.
It will achieve this by improving transparency and hence access to capital markets. One aim of CMU is to make information more readily available to a range of investors. This will reduce barriers to entry and expansion so that competition is enhanced. One way CMU can help is by promoting the voluntary disclosure by small and medium-sized enterprises (SMEs) of standardised raw financial information, such as periodic, audited financial statements. These will provide potential investors with relevant information. Moreover, CMU can provide an incentive for setting up voluntary scoring processes for non-listed companies.
This increased transparency will also enable investors to compete for the most profitable opportunity and allow projects to attract the most advantageous financing conditions.
Full speech
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