A capital markets union for Europe: The relevance of banks and markets

Markus Demary, Matthias Diermeier and Heide Haas

No 18/2015, IW policy papers from Institut der deutschen Wirtschaft (IW) / German Economic Institute

Abstract: The establishment of a Capital Markets Union (CMU) is a high-priority project of the European Commission. CMU should foster additional non-bank sources of finance, mobilize private savings more efficiently and enhance capital market integration. Although more integration is needed, the Commission's proposal misses the role of systemic functions in a CMU. First, banks are important intermediaries specialized in credit relationships and small and medium-sized companies gain from long-term relationships with banks. Second, overcoming financial fragmentation needs sound sovereign debt markets with stable sovereign finances. In a CMU sovereign risks have to be treated adequately in bank regulation. Third, it should be assessed in advance which sources of non-bank finance will be demanded by companies and will become systemic. We recommend an integrated financial supervision for the CMU. Therefore, the European Banking Union should cover all European Union members' systemic relevant banks. In order to mobilize private savings while coping with the CMU's complexity, the EU should foster financial literacy.

Keywords: financial aspects of economic integration; financial regulation; investment and savings; relationship-banking; sme finance; Banking and Insurance; European Central Bank; European Monetary Union; Banken und Versicherungen; Europäische Währungsunion; Europäische Zentralbank (search for similar items in EconPapers)
JEL-codes: F02 F33 F36 G21 G28 G30 G38 (search for similar items in EconPapers)
Date: 2015
New Economics Papers: this item is included in nep-cfn, nep-eec and nep-ias
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:iwkpps:182015

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