Journal of Financial Regulation · 2016 · 71 citations · 0 references
BusinessEconomicsFinanceBankingFinancial EconomicsFinancial MarketsCapital MarketsFinancial DevelopmentFinancial IntermediationInternational Financial IntegrationCross-border Financial IntegrationFinancial Market TransparencyFinancial Stability ImpactTrust In Financial Markets
Capital Markets Union is an economic policy initiative aimed at improving EU access to funding, capital allocation, savers’ prospects, and financial stability, though its effects will unfold slowly rather than as a short‑term fix for weak bank lending. The authors argue that achieving CMU requires sustained, multi‑front action to develop capital markets, deepen cross‑border integration, enhance transparency and comparability of information, and address financial stability concerns. They propose a staged process to maintain momentum and ensure Europe’s CMU truly reflects a union.
Abstract Capital Markets Union (CMU) is a welcome economic policy initiative. If well designed and implemented, it can improve access to funding, the allocation of capital, prospects for savers, and financial stability in the European Union. But since financial ecosystems only change slowly, CMU cannot be a short-term cyclical instrument to substitute for subdued bank lending. Shifting financial intermediation towards capital markets will require persistent action on multiple fronts. The policy agenda should aim to enhance both capital markets development and cross-border financial integration, two distinct but mutually reinforcing aims; to increase the transparency, reliability, and comparability of information, a key enabler of trust in financial markets which always involve information asymmetries; and to adequately address financial stability concerns. We propose a staged process to sustain the momentum and make Europe’s CMU fully worthy of its 'union' label.