SMEs significantly rely on bank loans for funding and evidence shows that bank lending remains the prioritised source of SME financing. CMU should be seen as a supplementary vehicle and should build on a strong and efficient banking system. Banks and capital markets work together and do not stand side by side.

ESBG emphasizes the importance of engaging retail investors in the capital markets to support Europe’s green and digital transformations.

ESBG advises to carefully consider the following points:

• Saving and retail banks are crucial for funding both the public and private sectors through retail savings or corporate finance solutions. Subsequently, they are ready to maintain a central and indispensable role in shaping the future trajectory of the CMU.
• The CMU’s progressive development is contingent on the EU’s ability to compete globally, which requires regulatory frameworks that promote stability and equitable conditions for the banking sector compared to other major jurisdictions.
• Proposals to further the CMU, particularly those related to financing green and digital transitions, necessitate increased attention from European institutions.

The ESBG emphasizes the need for thorough examination of proposals for the upcoming legislative session. This scrutiny is essential to assess their impact on the appeal to retail investors and to consider potential disruptions, costs, burdens, and the effect on the competitiveness of Europe’s financial players.

ESBG recommends a series of specific actions, which includes, among others, the following:

• Build a stronger commitment forward CMU from Member States
• Analyze and incentivize a proper tax treatment
• Keep the legal framework stable
• Avoid overload of information
• Make the securitization framework workable
• Streamline and strengthen sustainable finance

Furthermore, ESBG highlights that developing pan-European savings and/or investment products for retail investors must be duly considered without undermining the important role of savings and retail banks as financial intermediaries. ESBG points out that a cross-border savings product, if not well designed, can turn out to be a competitor for other traditional investment and savings products that banks already widely offer to their clients.

Separately, ESBG would greatly welcome well-designed initiatives to attract young people to securities investments. A targeted investment program for young Europeans is to be considered, provided it educates them about capital markets and promotes sound financial habits.  This would encourage them to adopt a diversified approach to financing, thereby reducing potential risks and increasing performance prospects.