Position Paper | Capital Markets Regulation

​​​​​​​​​​Capital Markets Union​

October 10, 2020

ESBG believes that a new European Commission plan for a ‘CMU 2.0’ should be used to identify and remove burdens presented by bureaucracy with the objectives of ensuring capital markets stability as well as providing capital markets access to all investors. Since the CMU aims at unlocking capital around Europe, increase in the participation of retail investors in EU capital markets is necessary.

Therefore, in our opinion, the ‘CMU 2.0’ should be focused on:

  • Restoring investor trust and raising confidence in capital markets.
  • Increasing financial education. Well-informed investors will make responsible investment decisions from the range of available capital markets products that are more adequately suited for their needs.

Making capital market financing more attractive by reducing “bureaucracy”. In the retail securities markets in particular, numerous regulations have been created in recent years (keyword MiFID II, PRIIPs), which lead to a bureaucratization of securities distribution without creating recognizable added value for clients.

As stated above, ESBG is convinced that it would not be in the interest of the European economy, taking into consideration that is strongly based on SME structures, to favour funding from capital markets over traditional bank lending. While deepening the CMU, which ESBG is fully supportive of, we believe that the European Commission should also ensure the proper functioning of the lending market. Pluralism and diversity in the European banking sector should be preserved in order to have a safer financial market.

​Identified Concerns

ESBG supports the European Commission’s plan to create a CMU. However, the success of the CMU is not conceivable without a properly functioning lending market. SMEs rely significantly on bank loans for funding. 70% of outstanding SME external funding in Europe comes from banks, and evidence shows that bank lending remains the favourite source of SME financing for the majority of SMEs. CMU is a supplementary vehicle, not a primary path to support SME financing.

Why Policymakers Should Act

ESBG believes that a policy of complementarity remains the best way forward to create a stronger and more competitive European Union. This should be borne in mind by policy-makers when further designing the CMU. In our opinion, it is equally important to promote the lending capacity of European credit institutions. This is where savings and retail banks in Europe can help. Backed by their long-standing experience in the regions, their wide network and proximity to the local companies enables them to build irreplaceable knowledge and trustworthy relationships. It also puts savings and retail banks in an ideally placed position to help empower the economy and boost sustainable, inclusive and smart growth by granting loans to SMEs.

ESBG welcomes that the Commission addresses many important issues on MiFID II in the MiFID “quick fix” in a very positive way.


A High-Level Forum (HLF) was set up in November 2019 with the mandate to propose independent policy recommendations that would feed into the Commission’s work on CMU. On 10 June, it published its Final Report, with 17 very granular recommendations (many of them including multiple sub-recommendations for action), with a timeline, on what should be done to achieve a CMU. The Forum emphasised that 17 clusters of recommendations are a package, that they are mutually reinforcing and dependent on each other – and thus all need to be implemented to achieve the CMU. The adoption of the CMU Action Plan is currently foreseen for early autumn 2020.​

Messaging 2019