The Quest for a Bold Capital Markets Union

The Capital Markets Union (CMU) has recently been driven forward. This includes, for example, the further harmonisation of EU stock exchange listing regulations. "But that's not enough. Further measures are needed, for example to increase the participation of retail investors in the capital markets," says cep financial expert Philipp Eckhardt, who authored the study with cep financial expert Anastasia Kotovskaia. According to Kotovskaia, the paper shows that EU households have a strong affinity for highly liquid products that only yield a low return. "However, this tendency is at odds with the central objectives of the Capital Markets Union," she says. The researchers present three concrete recommendations to overcome the strong reluctance of European retail investors.

Firstly, the Commission must simplify regulations with regard to the checking of sustainability preferences of retail investors in financial advisory processes. The existing procedures are too bureaucratic, difficult to understand and demotivating. Secondly, Brussels should introduce additional measures to improve EU citizens' poor financial knowledge and get them interested in the financial market. And thirdly, alternative regulatory concepts, such as so-called 28th regimes, should be considered, for example to facilitate cross-border investments by small investors and thus contribute to a more efficient allocation of capital.

The cep experts call for the ongoing legislative process on the EU retail investor strategy to make rapid progress in these areas.

The study on the Capital Markets Union is part five of cep's series on the challenges facing the EU after the European elections.