Europe's untapped capital market

 

The Capital Markets Union (CMU) project is an opportunity to rethink financial integration in a multi-currency area like the European Union after the crisis. The lack of private risk sharing, i.e. cross-border holdings of assets, lies at the core of the financial instability in the region. Integration of the single market is also a pre-condition for further coordination of fiscal policies in the euro area. Building on an extensive literature review and data analysis, on February 3rd, CEPS launched the European Capital Markets Expert Group (ECMEG) report, authored by CEPS Head of Financial Markets and Institutions, Diego Valiante. It is a comprehensive overview of the state of financial integration in Europe. The report assesses the role of private risk sharing to advance a union of capital markets and boost a dormant single market for goods and services. With a rigorous methodology based on financial contracting, the Report identifies 36 cross-border barriers to capital market integration and addresses 33 policy recommendations in three areas: price discovery, execution and enforcement. The report builds upon a yearlong discussion with academics, industry experts and policy-makers. To download the full report, please click here.