NEWS Release - European Commission - Public Consultation on the Capital Markets Union Mid-term review Brussels, 20 January 2017
1. What is the Capital Markets Union (CMU)?
The Commission's top priority is to strengthen Europe's economy and stimulate investment to create jobs. The EUR 315 billion Investment Plan for Europe helped to kick-start that process. We need stronger capital markets to strengthen investment in the long term. These would provide new sources of funding for business and entrepreneurs, help increase options for savers and make the economy more resilient. That is why President Juncker set out, as one of his key priorities, the need to build a true single market for capital – a Capital Markets Union (CMU) for all Member States.
The free movement of capital is a long-standing objective of the European Union — a fundamental freedom at the heart of the single market. Despite the progress that has been made, the EU's capital markets remain fragmented along national lines and European economies remain heavily reliant on the banking sector for their funding needs. This makes them more vulnerable if bank lending tightens, like it did during the financial crisis.
In a changing political and economic context, developing stronger capital markets in the EU is crucial. It will give businesses access to alternative, more diverse sources of funding so they can thrive. It will allow capital to move more freely across borders in the Single Market so that it can be put to good use to support our companies and offer Europeans more investment opportunities.
The Action Plan published in September 2015 sets out the priority actions needed to put in place the building blocks of a CMU by 2019, removing barriers to cross-border investment and lowering the costs of funding. As part of the third pillar of the Investment Plan for Europe, the CMU should help businesses tap into more diverse sources of capital from anywhere within the EU, make markets work more efficiently and offer investors and savers additional opportunities to put their money to workin order to boost growth and create jobs. The Communication published in September 2016 reaffirms the Commission's commitment to the CMU and calls for an acceleration of the reform, setting out the necessary steps for its fast completion.
2. What are the benefits of a CMU?
The CMU will complement Europe's strong tradition of bank financing, and will help to:
Unlock more investment from the EU and the rest of the world: the CMU should help mobilise capital in Europe and channel it to all companies, including SMEs, and infrastructure projects that need it to expand and create jobs. It will provide households with better options to meet their retirement goals.
Connect financing more effectively to investment projects across the EU: the CMU is a classic single market project for the benefit of all Member States. Those Member States with the smallest markets and high growth potential have a lot to gain from a better channelling of capital and investment into their projects. More developed market economies will benefit from greater cross-border investment and saving opportunities.
Make the financial system more stable: by opening up a wider range of funding sources and more long-term investment, reduce the vulnerability of EU citizens and companies to banking shocks, such as those they were exposed to during the crisis.
Deepen financial integration and increase competition: more cross-border risk-sharing, deeper and more liquid markets and diversified sources of funding should deepen financial integration, lower costs and increase European competitiveness.
3. Why is the Commission consulting on the CMU?
Some 15 initiatives have been completed by the Commission since the publication of the CMU Action Plan in September 2015, which corresponds to almost half of the actions envisaged in the Plan. Several more will be launched in the coming months and will be finalised by 2019.
The aim of this consultation document is to seek feedback on how the current programme can be updated and completed in order to provide a strong policy framework for the development of capital markets, building on the initiatives that the Commission has presented so far.
As we approach the delivery of the remaining CMU actions, it is appropriate to take stock of what has been done so as to build on these foundations. This consultation offers an opportunity for stakeholders to provide targeted input to complement and advance the actions put forward in the CMU Action Plan, ahead of the planned Mid-Term Review.
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