The EU financial system is mainly bank-based. Financial market financing in the EU is still not as developed as in the US. The previous European Commission noted that

• there were significant differences in financing conditions between EU countries,
• there were differing rules and market practices for products like securitised instruments or private placements
• shareholders and buyers of corporate debt rarely went beyond their national borders when they invested
• many SMEs still had limited access to finance.

To overcome these challenges, the Commission adopted in September 2015 an action plan setting out a list of over 30 actions and related measures. Its aim was to establish the building blocks of an integrated capital market in the EU by 2019. This action plan was updated and complemented in June 2017.

Building on the results of the previous Action Plan and on the gaps that still remain, the new Commission published a new Action Plan on the Capital Markets Union before the end of 2020. To achieve this aim, it launched on 10 October 2019 a call for expression of interest to join a High-Level Forum (HLF) on capital markets union. In November 2019 it announced the Forum's composition.

On 20 February 2020 the High-Level Forum published its interim report. The report identifies new challenges, such as the departure of the UK from the EU, the need to enhance the EU's financial stability and economic resilience, the protectionist trade policies taken by other economic powers, the climate emergency and rising inequality. While the report does not go as far as to put forward any specific policy proposals yet, it examines those issues and is expected to guide the work of the Forum over the following months.

On 10 June 2020 the High-Level Forum published its interim report. The report sets out 17 interconnected recommendations aimed at removing the biggest barriers in the EU’s capital markets. According to the report, completing CMU is particularly important now, as it can speed up the EU’s recovery from the coronavirus pandemic.

On 24 September, the Commission published the new (Communication) action plan, built on 3 key objectives and 16 associated legislative and non-legislative proposals:

Objective 1: Support a green, digital, inclusive and resilient economic recovery by making financing more accessible to European companies

• Action 1: Making companies more visible to cross-border investors
• Action 2: Supporting access to public markets
• Action 3: Supporting vehicles for long-term investment
• Action 4: Encouraging more long-term and equity financing from institutional investors
• Action 5: Directing SMEs to alternative providers of funding
• Action 6: Helping banks to lend more to the real economy

Objective 2: Make the EU an even safer place for individuals to save and invest long-term

• Action 7: Empowering citizens through financial literacy
• Action 8: Building retail investors' trust in capital markets
• Action 9: Supporting people in their retirement

Objective 3: Integrate national capital markets into a genuine single market

• Action 10: Alleviating the tax associated burden in cross-border investment
• Action 11: Making the outcome of cross-border investment more predictable as regards insolvency proceedings
• Action 12: Facilitating shareholder engagement
• Action 13: Developing cross-border settlement services
• Action 14: Consolidated tape
• Action 15: Investment protection and facilitation
• Action 16: Supervision

References:

• European Commission Communication 'A Capital Markets Union for people and businesses-new action plan' COM(2020) 590 final
• European Commission Communication ‘Commission Work Programme 2020 – A Union that strives for more’ COM(2020) 37 final
• European Commission Work Programme 2020 Annex I: new initiatives
• High Level Forum on the Capital Markets Union Final report
• European Commission Capital markets union 2020 action plan: A capital markets union for people and businesses

Author: Issam Hallak, Members' Research Service, legislative-train@europarl.europa.eu