Completing Capital Markets Union

An ambitious path of  reforms to successfully  accelerate the market-based financing of the Union’s economy

Introduction

The Capital Markets Union initiative was fully justified in the context born of the Global Financial Crisis
In the wake of the Global Financial Crisis (GFC), the issue of the stability of the financial system in general, and the banking system in particular, has become central. Various regulations, particularly in the prudential field, have thus been adopted, one of the very direct effects of which is the considerable increase in the constraints weighing on banks and on their ability to distribute credit. This has resulted in the need to change the financing model of the European economy, which has hitherto been credit-based, to ensure that it could increasingly rely on financial markets.
The Capital Markets Union (CMU) Action Plan unveiled in September 2015(1) aimed to achieve this transition. But, almost five years after its inception, it is still far from being complete – with only sparse legislations implemented to-date and very limited impact.
The development of deeper, autonomous and more integrated EU-27 capital markets is all the more essential as the Union today faces a number of financing challenges. These arise in particular from (i) the mitigation of climate change, (ii) the ageing of its population and (iii) the need to encourage the development of companies within the EU that can be global champions, especially in the digital field.
But the context in which these challenges can be managed has been renewed with Brexit. Brexit means the looming departure of the financial centre around which the financing of the European economy has largely revolved in recent years. The deepening and intensifying reflections around the future of the CMU initiative is therefore now an urgent issue. 
With this in mind, initiatives to revamp the CMU project were initiated in the second half of 2019 shortly after a new European Parliament was elected and not long before the new European Commission was officially due to take office. While the European Parliament’s own-initiative report is still underway as these lines are being written, two main workstreams deserve being mentioned: one at Member States’ level, the Next CMU High-Level Group chaired by Fabrice Demarigny whose report published in October 2019(2) very much inspired the Council’s conclusions on the deepening of the CMU adopted in December 2019(3), and the other at the European Commission (EC) level with the High-Level Forum chaired by 
Thomas Wieser whose final report has been recently  issued(4). 
Building on the contributions it has been making for many years to the process of developing an integrated market, the French Financial Markets 
Association (AMAFI) has decided to contribute to ongoing initiatives: CMU has been a core priority for its members since the early days of the Action Plan, and AMAFI has been closely following discussions on the proposed legislations and has answered most of the related consultations. To ensure that its reflections and proposals receive academic support from experts at the heart of these issues, the 
 Association mandated the Centre for European Policy Studies (CEPS) and the European Capital Markets Institute (ECMI) to provide with data and analysis(5) in order for AMAFI to work on a full set of policy 
recommendations to EU co-legislators(6). Through this report, AMAFI’s primary objective is to contribute to the EC’s ongoing reflections to complete the CMU project which will materialize later this Autumn by the adoption of the Action Plan. 

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