European Commission sets out proposals for EU capital markets union

The Commission said on 28 January it was opening a period of consultation into the CMU, which aims to remove “barriers to cross-border investment and lower costs of funding”.

The move will also boost private financing in support of a €315 billion investment plan for Europe, launched towards the end of last year, the Commission said.

EU commissioner for financial services, stability and the CMU Lord Jonathan Hill said: “One of the key challenges Europe faces is to get investment flowing to support jobs and growth. A true single market for capital in all 28 member states would help support that goal by linking savers and investors with businesses, big and small, that want to grow. It would also help broaden sources of funding, complementing the important contribution already made to our economy by the banking system.”

Lord Hill said a Green Paper to be launched “in a few weeks’ time” is among measures planned to help “identify the barriers that are stopping capital from flowing and work out how to knock them down one by one”.

According to the Commission, “many parts of Europe, especially small and medium-sized enterprises (SMEs) remain heavily reliant on banks for their funding needs”. The Commission said a “key objective” of the CMU will be to diversify and extend sources of funding so that businesses have easier access to credit through capital markets as well as banks, and “we need to boost the cross border dimension of access to funding”.

The Commission said it wants to hear the opinions of the European Parliament, national parliaments, EU citizens, SMEs, the financial sector and others as part of the CMU consultation process, before setting out proposed next steps in an ‘action plan’ to be published during the third quarter of this year.

Commission president Jean-Claude Juncker told the European Parliament last year (40-page / 1.68 MB PDF) that a CMU was needed to “complement the new European rules for banks”. The integration of capital markets would “cut the cost of raising capital, notably for SMEs, and help reduce our very high dependence on bank funding”, Juncker said. “This would also increase the attractiveness of Europe as a place to invest."