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The capital markets union (CMU) is the vehicle the EU's executive European Commission hopes will increase market-based funding for companies and wean the 28-country bloc off its heavy reliance on banks.
It will focus on cutting red tape for smaller companies which want to list on stock markets to raise funds, and find ways to increase securitization, or the sale of debt based on a pool of loans like mortgages.
In the first response to the EU plans from a British regulator, Cunliffe urged some caution.
"Though there may be early wins, it will involve a carefully planned, detailed and sustained effort over a number of years and in a very wide range of areas. The benefits however could be very large indeed."
Creating a deeper stock market should be the priority for the CMU as equity provides the most efficient forms of risk sharing, Cunliffe said.
But institutional change seen with the new euro zone banking union will not be needed for the CMU, Cunliffe said.
This is a reference to concerns in Britain, the bloc's biggest securities market, that a new EU super-regulator for markets will be created in the same way the European Central Bank now supervises top euro zone lenders.
A push by Brussels for a new, more powerful EU regulator to oversee the City of London financial sector would stoke anti-EU sentiment in Britain ahead of the May general election.