Capital Markets Union (CMU)

Capital Markets Union (CMU)


The European Union defines the CMU as “ways of reducing fragmentation in financial markets, diversifying financing sources, strengthening cross border capital flows and improving access to finance for businesses, particularly SMEs”. A Green Paper was published in February 2015 in this respect, followed by an Action Plan in September 2015. The follow-up work consisted of a Mid-Term Review in 2017, a Communication to accelerate delivery in March 2018 and a progress report in March 2019. With regard to CMU, BIPAR stressed the need for the EU to focus on initiatives that reduce administrative burden for (small) firms. BIPAR also stated that, to remain competitive and attractive, the EU must avoid overregulation, that there is a need for stability and supervision must be tailored for the sector. Currently a High Level Forum on capital markets union is preparing targeted policy recommendations for future CMU actions. The Commission is expected to issue a new CMU action Plan by Q4 2020.

The CMU Action Plan of September 2015 was built around the following key principles:

  • Creating more opportunities for investors;
  • Connecting financing to the real economy;
  • Fostering a stronger and more resilient financial system;
  • Deepening financial integration and increasing competition.

The Action Plan contained a list of actions and (non-) legislative initiatives, such as on personal pensions or sustainable finance. Indeed, many current legislative proposals, for example, the PEPP Regulation, the proposals on sustainable finance or the ESAs review are main building blocks of the CMU.

The 2017 CMU Mid-Term Review set out priority actions and legislative proposals on which the Commission wanted to move quickly (for instance, the review of the prudential regime for investment firms and the PEPP proposal) and the 2018 Communication (“Completing the Capital Markets Union by 2019 - time to accelerate delivery), contained amongst others further Action Plans on Sustainable Finance and Fintech.

In March 2019, the Commission published a Communication on the CMU: “Progress on building a single market for capital for a strong economic and monetary union”. This 2019 Progress Report takes stock of the completion of the building blocks of the CMU, stating that the Commission has now tabled all envisaged legislative proposals and stressing the need for the European Parliament and the Council to accelerate work on the pending proposals to ensure their completion by the end of the legislative cycle. Finally, the Commission adds that legislation alone will not deliver the CMU. Member States, national authorities and private stakeholders all play a vital role in building the CMU. Future action will need to reflect the impact on capital markets of the UK’s departure from the EU and other short or medium-term economic and societal challenges (such as climate and technological developments).

In May 2019, the French, German and Dutch finance ministers signed a joint plan, calling for more integrated capital markets in Europe. They point at climate and technological change, as well as Brexit, making the need for a well-designed capital market for the EU to become an urgent strategic issue. In October 2019, the 3 finance Ministers presented the report of this “Next Capital Markets Union” high-level working group at the Eurogroup meeting. The Group suggests amongst others a new name for CMU: “Savings and Sustainable Investment Union” and invites political leaders to focus on two EU major objectives:

  1. Adopting and promoting a capital market that offers saving products to serve citizens’ needs and that allocates capital to value creating investments in the real, innovating and sustainable economy.
  2. Building/strengthening an integrated, competitive, deep and liquid European Capital Market, to maintain the EU as one of the top 2 financial centres of the world.

Also in October 2019 the European Commission launched the concept of a High Level Forum on capital markets union which will propose targeted policy recommendations for future CMU actions, to ensure that citizens and businesses can access capital markets across the EU on equal terms and irrespective of their geographical location.

In March 2020 the CMU High-Level Forum published its interim report, stating that the following measures (among others) could be envisaged to complete the CMU:

  • To steer citizens towards long-term investment products,
  • To facilitate access to high-quality advice,
  • To improve access to simple and transparent investment products,
  • To improve access to trustworthy financial advice, including genuinely independent advice.

On 10 June 2020, the HLF published its final report. It makes (among many other recommendations and as expected) recommendations to complete the CMU with regard to fostering retail investment. Examples of the recommendations made for this topic to the Commission include:

  • to examine consistency of IDD IBIPs rules with MiFID rules such as ban on commission for independent advice for IBIPs;
  • to examine the role of inducements for the adequacy of advice,
  • to examine how transparency of inducements can be further improved;
  • to introduce in IDD and MiFID certificates to prove training;
  • to introduce a pan-European quality mark (label) for European financial advisors to be used on voluntary basis;
  • to review asap the PRIIPs Regulation;
  • to analyse and assess all relevant disclosure rules in place

The report contains 17 recommendations in total on various issues. The Commission also launched a consultation on the report, which runs until 30 June and to which BIPAR will respond.

Next steps

For the new Commission, the ongoing project to create a genuine capital markets union will continue to be a priority, in particular access to financing for companies and making cross-border investments easier.

- Published on June 2020 -

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