The Capital Markets Union (CMU) is one of the flagship initiatives of the European Commission under its President Jean-Claude Juncker. Its central aim is to enhance economic growth in the EU by increasing the role capital markets play in the financing of the economy and by leading towards the integration of financial markets.

Objective

It reflects the shift in political priorities from crisis management towards meaningful growth and reduction of unemployment levels. The overarching objective is to create growth and jobs for Europe based on stable and liquid capital markets. The Capital Markets Union is a framework programme which will develop the roadmap for reaching this goal. It is about building on the link between economic growth and capital markets, i.e. strengthening capital markets to foster growth.

Bank funding has been decreasing in response to higher capital and liquidity requirements. To close the gap in needed funding, alternative non-bank funding channels need to be further developed. Ultimately, the Capital Markets Union should support efficient capital allocation throughout the EU leading to a broader and more efficient financial system.

As a regulated provider of market infrastructure to global capital markets and as a marketplace organiser, Deutsche Börse Group is a key player within the establishment of the Capital Markets Union. Market infrastructure providers are well positioned to contribute to the public consultation process on which features the Capital Markets Union should encompass.

Deutsche Börse Group has elaborated the following six core principles which it considers prerequisites for a functioning Capital Markets Union.

• revive investor trust
• improve non-bank funding
• promote financial stability
• increase transparency
• foster harmonisation, and
• shape the supporting regulatory and supervisory environment

The Capital Markets Union represents a joint vision for policymakers, as well as industry and societal stakeholders, to further integrate and deepen financial markets across all 28 EU Member States.

Time line

In September 2015, the European Commission published an action plan on building a Capital Markets Union by 2019. While some of the implementation measures may be modest, their cumulative impact will be significant. For example, the Commission has adopted initiatives on securitisation, Solvency II, venture capital funds, covered bonds, calls for evidence as well as retail financial services.

The European Commission officials continue to strongly back the CMU Action Plan, arguing the project is more necessary than ever for the Member States: to improve financing conditions, but also to function as a risk transfer mechanism between them. On 14 September 2016, the Commission announced it would accelerate the reform.

On 20 January 2017, the European Commission launched a public consultation on the CMU, a so-called mid-term review. Market participants were invited to submit their comments by 17 March 2017. The reform is thus entering into a more ambitious second phase, tackling some challenging issues such as insolvency laws and withholding tax procedures.

In March 2018 the European Commission has published additional action plans. Topics were, amongst others, "Fintech", "Financing Sustainable Growth" and "Crowdfunding".

CMU: the highlighted parts of the value chain are affected