Capital markets union redux : towards a deeper and more accessible savings and investments union

Europe faces massive investment needs: it must regain competitiveness, provide stability to its ageing population, and confront climate change and external threats. This has renewed the urgency of the decade-old European Union (EU) project for a capital markets union (CMU). CMU is a cornerstone of the EU strategy to reduce longstanding barriers to integration, while achieving greater economic resilience and mitigating the risk of future crises. By strengthening its financial infrastructure and fostering an integrated financial market, CMU will enable a more efficient matching of savings and investments domestically and across borders. Our contribution to the policy discussion focuses on unleashing the potential of retail investors and small entrepreneurs to make better use of European capital markets, reducing their dependence on banks. We examine the profile of European retail investors and discuss measures that have proved effective in enhancing household participation in capital markets and fostering cross-border investments. We argue that wider access to equity and equity-like instruments is essential for providing the capital needed for growth and for financial stability. We also point to the enhanced role that banks can play through the securitisation of loans for small and medium-sized enterprises (SMEs). These elements would help to convert CMU into a savings and investments union (SIU) for people and firms.