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Capital markets union – tackling national barriers to investment

Capital markets union

Member States need to do more on financial markets integration.


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Partner & Head of Asset Management

KPMG Accountants B.V


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Capital markets union (CMU) has regained some momentum with the European Commission publishing its mid-term review consultation (see KPMG summary) and more recently a report on addressing national barriers to capital flows. True to its promise to look beyond pure regulatory measures, this latest report targets the barriers to investment from national approaches and measures. Stopping short of naming and shaming, the European Commission highlights that Member States need to do more on financial markets integration for capital markets activity to improve. However, the national barriers are often deep-rooted and change will be challenging.

Key areas of focus for the Commission are barriers before, during and at the end of investment, including:

  • National marketing, administrative and local regulatory fees requirements
  • Home bias over investment choices and consumer protections
  • Residence requirements on management for supervision
  • Insufficient financial literacy
  • Differences in insolvency regimes and tax discrimination

CMU is a key initiative for Europe. Broadening financing options for business and increasing the opportunities for investment requires significant change across a range of complex interconnected issues, both regulatory and structural. So far, the Commission has tackled mainly the regulatory barriers, with specific proposals to help loosen the financial system, and also helping businesses to access capital markets. Critics of CMU have always argued that national self-interests are the greatest obstacle to Europe having more vibrant capital markets. Brexit makes the need for broader EU capital markets all the more important as the market access of European businesses and investors via the UK will likely be restricted.

The Commission has published the report ahead of developing a roadmap in the coming months. The areas of focus have been developed by an expert group and it is important that industry and other stakeholders engage in the process now.  

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