Market Building and the Capital Markets Union: Addressing Information Barriers in the SME Funding Market

Schammo Pierre
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Schammo Pierre: Reader in Law, Durham Law School. Versions of this paper were presented at the European Company and Financial Law Review Symposium, Copenhagen, 30 September 2016 and at the Centre for European Policy Studies (European Capital Markets Institute), Brussels, 8 February 2017. I wish to thank the organisers of the events, especially Heribert Hirte, Jesper Lau and Apostolos Thomadakis. I am also indebted to Fabrice Demarigny, Alexis Marchand, Riccardo Bonci, and Gerhard Huemer for their comments on SME funding. This paper was written during my sabbatical stay at the European Institute, London School of Economics and Political Science. I would like to thank the European Institute for its hospitality and especially Waltraud Schelkle for insightful discussions on European banking and capital markets policy. This article charts developments in the CMU action plan up to March 2017.United Kingdom of Great Britain and Northern IrelandDurham Law School

European Company and Financial Law Review, 2017, vol. 14, issue 2, 271-313

Abstract: The Capital Markets Union (CMU) is one of the flagship policy initiatives of the Juncker Commission. The Commission’s strategy for realizing a CMU is set out in its White Paper on building a CMU. Besides describing the Commission’s vision of a CMU, the white paper includes an action plan which details the measures that are needed to build a CMU. The aim of this article is to consider the Commission’s measures in one particular area of the action plan. Specifically, this article examines the Commission’s strategy for overcoming information barriers to SME investment. By acting in this area, the Commission’s objective is to facilitate access to finance, but also to diversify sources of funding for SMEs, which are traditionally heavily dependent on bank-based finance. This article evaluates the Commission’s strategy and its prospects of success. After assessing the relevant policy measures, it will argue for a paradigm shift which is based on three pillars: a greater emphasis on market building measures; a greater emphasis on information sharing duties as one mechanism that can help to address information barriers; and a market correcting strategy to dovetail greater market building.

Date: 2017
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DOI: 10.1515/ecfr-2017-0014

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