Capital Markets Union #1 – Financing the real economy
30 November 2018
The Capital Markets Union (CMU) is a EU initiative that aims to deepen and further integrate the capital markets of the 28 member states. As a European lending marketplace aiming to serve the real economy, October supports this program.
The CMU series will be composed of 3 episodes. This first episode explains what the Capital Markets Union is and what its main objectives are.
According to the “Small and medium-sized enterprises’ access to finance” (2016) report by the European Commission, one of the most important issues facing European SMEs is their difficulty accessing finance, which is still mainly bank-based.
While SMEs are increasingly competing in a globalized market, the search for funding mostly takes place at a local level. Despite the progress achieved thus far, capital markets today remain fragmented and are typically organized in European national lines. The European Commission was recently acknowledged the need for a Capital Markets Union in the Investment Plan for Europe (also known as “Juncker Plan”), which aims to unlock public and private investments into the real economy.
What are the objectives of the Capital Markets Union?
The objective of this ambitious program is to support European SMEs by making it easier for them to access financial resources from investors across the European Union. The European Commission has identified 5 priority areas in the Action Plan:
- Enhancing access to diversified financing instruments for SMEs, in complement to bank credit, especially through Fintech companies.
- Creating a regulatory framework that favours long-term investments and the financing of infrastructures in Europe.
- Increasing investment opportunities for retail and institutional investors and boost competition.
- Strengthen banks’ lending capacity.
- Remove cross-border barriers and develop capital markets for all 28 Member States.
European companies can’t succeed without it: why?
At October, we are convinced that the creation of an efficient and well-integrated Capital Market Union is a fundamental pre-requisite for European competitiveness. It would make it easier for players to operate on an international scale, increasing the resources of investors to directly support businesses.
Additionally, if the common European crowdfunding regulation becomes a reality, investors and SMEs alike may finally have the tools they need to lend and raise money across Europe without having to comply with a patchwork of national rules.
This would speed up the adoption of alternative financing methods by enterprises and start-ups, the engine of European economic growth.
In the next episode we will talk about the ELTIF funds: how they work and why October chose this vehicle to support its international growth.