Capital Markets For a More Competitive Europe

The Confederation of Swedish Enterprise supports the aim of the Capital Markets Union (also referenced as the Savings and Investment Union) (in the following the “CMU”) to create a single market for capital. Strong, well-functioning capital markets are critical for businesses and are key to achieving the EU’s long-term goals, such as the twin transition and increased competitiveness. As shown in the Draghi-report, the EU has the foundations in place for a highly competitive economy but must urgently focus on increasing productivity growth. Therefore, investment levels need to increase across the EU in the coming years. The following paper details our views on how the CMU can best support the goal of meeting businesses’ investment needs.

If the CMU is to aid in raising investment levels, any actions to reinforce and implement the CMU should be designed to strengthen EU companies’ access to finance by identifying their unmet needs, areas of potential improvement and by facilitating financial market innovation. This is especially important when it comes to complex, transformative and technology intensive investments where banks, which dominate corporate lending in the EU, are less suited to provide financing. The long-term goal should be to make the EU more attractive both to foreign and domestic investors, in order to increase investment in the areas that will drive future productivity growth.

Our key messages regarding the CMU are the following:

• Any actions taken to reinforce and implement the CMU should strengthen EU companies’ access to finance by identifying their unmet needs, areas of potential improvement and by facilitating financial market innovation, thereby supporting the aim of increasing investment in the EU.
• Focus on competitiveness and improving business conditions to attract and increase investment. Financial market outcomes are greatly driven by the real economy. Do not overestimate the role of financial regulation.
• Increase the size and liquidity of EU capital markets by encouraging a shift of household savings to the capital markets. This can be done via attractive savings accounts and reformed pension systems at the member state level.
• Leverage the diversity in the EU by improving each individual market through a structured process. Be careful when attempting to harmonize financial market rules across the EU. Many issues are more effectively resolved by an inter-governmental approach, where the EU has an important leadership role.
• Focus on enhancing the coordination and exchange of information between ESMA and national authorities. Centralized supervision would be difficult to implement effectively and would bring limited benefits, if any.