The European Securities and Markets Authority (ESMA) has proposed ways to strengthen the European Union’s (EU) capital markets, so that markets can better serve the needs of European citizens and businesses and remain competitive globally.
The ESMA Position Paper, Building more effective and attractive capital markets in the EU, outlines 20 recommendations, with a focus on broadening access to capital markets for citizens and firms, as well as harmonising regulation and supervision across the EU. The recommendations are directed not just towards regulators, but member states, the European Commission and EU co-legislators, as well as the broader financial services sector. “Faced with urgent financing needs and a necessity to boost the competitiveness of European businesses, a renewed effort to strengthen EU capital markets has emerged,” the paper notes.
While some progress has been made to improve efficiency, scale and resilience, EU capital markets remain “underdeveloped”, the paper suggests. At the end of 2023, the EU27 share of global equity market capitalisation stood at just 11% compared to 45% for the US. “Moreover, this share declined over the past 15 years: in 2009 it was 16% for the EU27 and 34% for the US,” the paper notes. Other statistics, such as on public listings, are similar: the EU share of global IPOs from 2015-2020 by value was 15%, less than half the US figure of 32%.
Verena Ross, ESMA chair, said: “Creating effective and attractive EU capital markets requires improving the wider market ecosystem and putting investors and companies at the heart of it. Steps are needed to ensure capital markets can play their role in supporting the financing needs of Europe. Therefore, ESMA today puts forward proposals for how markets can serve the needs of European citizens and businesses.
“Taking into account the current state of the capital markets and leveraging on our expertise and engagement with stakeholders, we have built this comprehensive set of recommendations. As we publish our position paper, I would also like to thank the members of ESMA’s Board of Supervisors for their ideas, suggestions and support, which allows us to bring the voice of securities regulators to the debate.”
Key proposals include giving EU citizens simple and cost-efficient investment options to invest their savings in capital markets by developing long-term investment products and pension systems, as well as broadening financial education.
For EU firms, ensuring diverse and sustainable financing options are available to support growth, with the paper recommending the development of an ecosystem for public companies and fostering pan-European markets by addressing barriers to integration, particularly for market infrastructures.
On the regulation side, the paper recommends modernisation of the EU’s regulatory framework, to account for new tools such as effective forbearance powers. Supervisory consistency among EU supervisors should also be prioritised, and any further centralisation of supervision at EU level should be evaluated.
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