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20 March 2015

House of Lords: Capital Markets Union - a welcome start


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The report supports the Commission’s proposals, saying that a Capital Markets Union is a timely and important initiative, but the Committee warns that it must be rolled out carefully, with the protection of investors’ money at its heart. It includes quotes from Graham Bishop.


A new report on the EU’s proposals for a Capital Markets Union has been published by the House of Lords EU Economic and Financial Affairs Committee. The report notes that the initiative is unlikely to benefit all SMEs. The EU should also learn from the US example of the effective use of capital markets as a source of finance. In the US, 80% of capital funding comes from capital markets and 20% from banks, whereas the reverse is true in the EU.

Findings of the report include:

  • A Capital Markets Union could be a major engine for stimulating growth in Europe, by diversifying businesses’ access to finance. At the same time, cross-border capital for infrastructure and long term investment needs to be unlocked
  • The Commission must strike the right balance between ensuring SMEs access a wider variety of finance, with the need to protect consumers and investors
  • The Commission must take account of the specific characteristics of each element of the EU’s capital market, as well as the diverse needs and priorities of different Member States
  • The Commission’s proposals must be road-tested through intensive Impact Assessments.
  • The UK should use its expertise and share best practice with other Member States

Commenting on the report, Committee Chairman, Lord Harrison, said:

"For far too long in the EU we have been reliant on traditional sources of funding, and it is becoming increasingly clear that there is a huge opportunity that lies beyond the banking sector. One need only look at some of our international competitors, such as the US, where alternative credit is now very much part of the funding furniture, and making a real difference.

So the Committee believes that a European Capital Markets Union, which unlocks capital and provides much-needed alternative sources of finance to SMEs across the EU, will be a significant boost to growth and jobs creation. We also urge the UK, where capital markets are better established than in other Member States, to take the lead in spearheading this Capital Markets Union.

Two areas which we are pleased to see the Commission address are the review of the Prospectus Directive and the development of a framework for high quality securitisation. We also want to encourage national and EU measures to allow peer-to-peer funding and crowdfunding to flourish. It’s encouraging to see that such online financing is booming, but more needs to be done to make it a genuinely pan-EU activity.

Of course we need to tread carefully – a move to more diversified sources of funding needs to go hand-in-hand with improved investor protection, and greater clarity for the consumer. But overall we envisage that a robust, properly assessed Capital Markets Union could be a vital key to securing a long-term, sustainable economic recovery.”

The report is the Committee’s formal response to the Commission’s February Green Paper, Building a Capital Markets Union. The EU Commissioner with responsibility for its development, Lord Hill of Oareford, told the Committee that “the purpose of Capital Markets Union is to make it easier to link savings to growth and to channel savings from anywhere in the EU to be invested in businesses anywhere in the EU. The goal is a true Single Market in capital.”

To view a video of Lord Harrison talking about the report, please visit this Youtube link.

Full report



© House of Lords


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