A Capital Markets Union for Europe: The Relevance of Banks and Markets

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.