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21 February 2018

ECMI: Towards variable Union in Europe's capital markets

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CMU must go beyond the actions set for end-2019. CMU is a long-term project that will require the support of multiple stakeholders from both the public and private sectors.

Capital markets, in particular equity, and long-term institutional investors, are best suited to finance real assets in the economy. There are certainly areas that should be brought within the remit of ESMA, but achieving supervisory convergence will be the main objective where this is neither possible nor necessary. Brexit-driven relocation might lead to a more balanced landscape of the euro-denominated clearing activities in Europe. With respect to the potential of distributed ledger technology, it is essential to establish a critical mass of market players and interoperability with the existing infrastructures.

The future of Europe's capital markets is uncertain in the face of policy, market and technological developments.

In the wake of the financial crisis, the Juncker Commission set the ambition of further aligning the different markets in Europe and allowing for better risk-sharing mechanisms.

Three years on, it is clear that it remains a useful project, but is probably also a distant objective. Asset allocation patterns in Europe continue to be very diverse. Political events in the most developed European capital markets will create additional barriers. Global technological developments raise big governance questions and market supervisory structures are evolving in a more ad hoc way, rather than being clearly structured.

For ECMI, this means that much remains to be done to monitor these developments and remind policymakers of the inefficiencies in Europe's capital markets.

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