Capital markets across the EU remain under-developed and many companies, especially small and medium-sized enterprises, struggle with access to capital (“How Europe failed to challenge the US”, The Big Read, April 26).
The EU must learn the right lessons. If the objective is to improve funding conditions for companies across the whole union, the purpose of the capital markets union (CMU) project cannot be to replicate the City of London in the EU. Nor can the US provide a suitable blueprint for European capital markets of the future, given the different starting conditions when it comes to language, distribution models, investor preferences or legal frameworks.
Instead, the motto of the EU, “united in diversity”, should become the guiding principle for designing a “polycentric” capital markets union that works for the benefit of citizens and companies in all member states.
Leveraging the EU single market with a best-in-class regulatory framework, the EU can become a highly dynamic provider of financial services, able to deliver tailor-made products that respond to the varying and evolving needs of a domestic, European and global client base.
Taking into account the relatively low starting point, there is potential to significantly increase the overall depth and liquidity of European capital markets by beginning from the ground up and focusing on incremental progress in all member states, bearing in mind existing differences in market characteristics and business models.
The expertise of national competent authorities will be key for establishing “enabling” financial sector ecosystems to channel investments in the green and digital transitions.
A further centralisation of supervisory powers would on the other hand be counterproductive, as it would deprive local financial market participants and public authorities of access to the crucial interlocutors needed to improve the framework conditions for developing capital markets throughout the union.
A successful CMU also requires capital markets that are open, within the EU as well as towards global markets. Creating closely interconnected international, regional and local financial hubs will help ensure that at each stage of their development, companies across the EU are able to access the funding sources that are best suited to their specific needs.
Since the global financial crisis, we have seen a loss of competitiveness of the EU financial sector to the benefit of financial centres outside the bloc. We are convinced that only a polycentric capital markets union will be able to reverse this trend and enable the EU to tackle the challenges that lie ahead.
Luxembourg Minister of Finance
Polish Minister of Finance