What Will It Take to Build a Truly Unified Capital Market in Europe?

The seminar hosted by Studieförbundet Näringsliv och Samhälle (SNS) and Swedish House of Finance (SHoF), saw panelists Nicolas Véron, Senior Fellow at Bruegel and the Peterson Institute for International Economics, Kristin Magnusson Bernard, CEO of Första AP-fonden (AP1), Stefan Ingves, SHoF Senior Fellow and Johan Almenberg, State Secretary to the Minister for Financial Markets, discuss challenges and opportunities of a future Capital Markets Union (CMU), a policy initiative by the European Union (EU) aimed at creating a single, integrated capital market across all EU member states, especially within the eurozone. 

Over the past decade, the idea of a CMU within the EU has been the subject of extensive discussions, with various proposals aimed at harmonizing regulations across member states. Despite these efforts, progress has been limited, and significant challenges remain. As Stefan Ingves put it: 

 

"Everyone’s in favor but nothing happens."

 

The reason, he argued, lies in the complexity of reconciling many overlapping objectives across 27 member states, making it hard to reach a consensus. He said that the most important first step is to have a uniform "financial plumbing" in the EU. That includes the infrastructure behind clearing and settlement, common standards for financial instruments, and interfaces that make cross-border investment function more seamlessly.  

 

"So, everyone on the European markets understands what they are buying and selling," Ingves said.  

 

Legal alignment is also needed, particularly around rules regarding emissions, listings and regulatory for supervision. Institutions such as the European Securities and Markets Authority (ESMA) must be given the tools to play a more central role. 

 

Nicolas Véron, with a perspective both from the inside and outside of the EU, noted that the perception of ESMA’s role has improved over the past decade. He argued that the geopolitical shifts of recent years have added new relevance to the CMU agenda—though the pace of change remains glacial. 

 

Kristin Magnusson Bernard said there are reasons to be cautiously optimistic about the Savings and Investment Union, a policy initiative aimed at giving opportunities to EU citizens to invest in capital markets to boost potential household wealth and retirement security.  

 

As a complement to the CMU, the SIU’s goal is to lower the barriers to enter the EU financial markets for long term investments. To make this work, Europe needs accessible tools for retail investors and to enhance financial literacy, Magnusson Bernard said. She also called for more opportunities for pension funds to invest in public and private equity.  

 

The fragmentation across jurisdiction and investor types must also be reduced and it is important to level the playing field across jurisdictions, she said. At the same time, Magnusson Bernard added that there is no quick fix because building equity tolerance as an investor is a skill you learn over time, and that takes time and experience. And there are also different cultural norms around "risky" investments that need to shift in the EU.  

 

"You need to allow markets to mature and deepen. Don´t rush it," she said.