Capital Markets Union #1 – Financing the real economy
30 November 2018
We have realized three episodes for the series Capital Markets Union (CMU) to illustrate this EU initiative which aims to deepen and further integrate the capital markets of the 28 member states. We’re very supportive of this programme as October is an international online financing platform (active in France, Italy, Spain and The Netherlands) whose mission is serving the real economy. This first episode explains what Capital markets Union is about and what its main objectives are.
According to the analysis conducted by the European Commission “Small and medium-sized enterprises’ access to finance” (2016), one of the most important issues facing European SMEs is their difficulty accessing finance, which is still mainly bank-based.
While small and medium-sized enterprises are increasingly competing in a globalised market, the search for funding mostly takes place in the country of origin. Yet, despite progress has been made, capital markets today remain fragmented and are typically organised on European national lines. The role of a Capital Markets Union has recently been recognised by the European Commission leading to the Investment Plan for Europe (also known as “Juncker Plan”) in 2014 aiming at unlocking public and private investments in the real economy.
What are the objectives of the Capital Markets Union?
The objective of this ambitious programme 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 SME access to diversified financing instruments as a complement to bank credit, especially among the world of 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 suppliers to operate on an international scale, increasing the resources of investors to directly support businesses.
If a proposed new “passport” licence for crowdfunding platforms 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 channels by enterprises and start-ups, which are 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.