During a speech at the European Banking Congress in Frankfurt, the president of the ECB Christine Lagarde relaunched the proposal reform of the EU capital markets. This is about greater European integration of the way banks work, which would be standardized across all countries, under the control of the European Central Bank.
For i savers this would mean easier access to European financial markets, with new tools to manage your assets. For companies, particularly innovative ones looking for investments, the Capital Markets Union (CMU) would allow them to find new financing and not have to turn, as often happens, to the US market.
Lagarde relaunches the capital markets union
During the European Banking Congress in Frankfurt, the President of the European Central Bank Christine Lagarde relaunched the reform of the European capital marketsalso known as Capital Markets Union (CMU). This is a long-term project that provides for greater supervisory responsibility of the ECB over European banks and rules shared by all countries on credit institutions.
“The technological gap between the United States and Europe is now undeniable. The geopolitical environment has also become less favourable, with growing threats to free trade coming from all over the world. As the most open economy among the major ones, the EU is more exposed to these trends than others. The Capital Markets Union is at the heart of all these challenges,” said Lagarde
It is not the first time that this reform has been discussed within the European Union but, as underlined by Lagarde herself, all the legislative initiatives begun in the past, more than 50, have ended in failure due to local interest groups that stopped integration of capital markets. Now, however, the change could no longer be postponed according to the ECB.
What changes with the Cmu for savers
The problem that this reform addresses is that of the inability of EU financial markets to move private capital invest in new businesses. In 2023, equity financing in European markets was equal to 84% of eurozone GDP. This same figure in the US is over 170%. This is where Europe’s economic and innovation lag behind the United States comes from.
More and more innovative European startups end up seek financing in the USA and then move more and more headquarters and operations to the other side of the Atlantic, because they cannot find capital in Europe. One of the reasons for this phenomenon is precisely the fragmentation of European financial markets. It is difficult for an Italian saver to invest in France or Germany and therefore new companies have access to much more limited capital than they could count on after the CMU.
Europeans also have a propensity to save very pronounced, around 13% of their income, but they leave this capital in deposit and current accounts which often offer little or no returns also thanks to the lack of competition. Greater integration of European capital markets would therefore also benefit savers.
An example of what could happen with the application of Cmu is the recent entry into the Italian banking market of the Spanish credit institution BBVA. Thanks to a very competitive online offer, which offered returns on a current account unparalleled in the Italian market, over half a million customers arrived in just a few years.
