COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE EUROPEAN COUNCIL, THE COUNCIL, THE EUROPEAN CENTRAL BANK, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS Capital Markets Union: progress on building a single market for capital for a strong Economic and Monetary Union
Date: 2019-03-15
Institutions: Directorate-General for Financial Stability, Financial Services and Capital Markets Union, European Commission
Subjects: Economic and Monetary Union, administrative formalities, aid to undertakings, capital markets union, financial legislation, financial supervision, investment policy, simplification of legislation, single market, sustainable development

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 15.3.2019  COM(2019) 136 final  COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE  EUROPEAN COUNCIL, THE COUNCIL, THE EUROPEAN CENTRAL BANK, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS Capital Markets Union: progress on building a single market for capital for a strong Economic and Monetary Union {SWD(2019) 99 final}  
 
 
1. 

INTRODUCTION 

Building a Capital Markets Union has been a key priority for the Juncker Commission. Almost 
five years later, the need for more integrated and deeper capital markets is undisputed. In December 
2018,  EU  leaders  called  for  ambitious  progress  on  the  Capital  Markets  Union  by  Spring  2019,  as 
outlined in the Eurogroup report to leaders. The European Central Bank has also repeatedly underlined 
the need to advance on the Capital Markets Union.1 

At the Spring European Council of 21-22 March, EU leaders will discuss the further development of 
the Single Market, including the Capital Markets Union, industrial policy and European digital policy 
in preparation for the next Strategic Agenda of priority areas for longer-term EU action and focus. 

The  Capital  Markets  Union  is  necessary  to  complement  the  Banking  Union  and  to  strengthen 
the Economic and Monetary Union and the international role of the euro2. Deeper integration of 
capital  markets,  together  with  more  integrated  banking  systems,  can  help  to  maintain  cross-border 
capital  flows  and  sustain  investment  in  Member  States  suffering  large  asymmetric  macroeconomic 
shocks.  These  private  risk-sharing  mechanisms  play  a  particularly  important  role  in  cushioning 
country-specific shocks in the Economic and Monetary Union and contribute to risk-reduction in the 
financial  sector.  For  example,  new  rules  will  boost  the  ability  of  EU  investment  firms  to  help 
companies to tap capital markets, manage assets, and provide market liquidity, thereby facilitating risk 
sharing and investments across the EU. 

The Capital Markets Union is also an important Single Market project. It will increase firms’ 
and citizens’ access to capital markets ‒ especially in smaller countries ‒ by making links between 
their  local  capital  market  ecosystems  and  deeper  pools  of  capital  across  the  EU.  By  diversifying 
sources  of  finance  for  EU’s  businesses,  the  Capital  Markets  Union  can  support  investment  in 
innovation and technological developments, thereby promoting the EU’s global competitiveness. 

For example, thanks to new rules on prospectuses and on SME Growth Markets, companies will be 
able  to  seek  more  funding  from  across  the  EU,  including  by  listing  on  a  stock  exchange  in  another 
Member State. A new approach to preventive restructuring will help viable companies to restructure 
early  on  and  avoid  insolvency,  and  will  give  honest  entrepreneurs  a  second  chance  to  start  a  new 
business instead of being penalised for failing in their first business attempt. For citizens, the new pan-
European personal pension product and the measures to improve the EU's investment fund market will 
provide new saving and investment opportunities. For local markets, new rules on covered bonds will 
give banks a stable and cost-effective source of funding. 

A  well-developed  Capital  Markets  Union  in  the  EU  is  also  important  from  the  perspective  of 
global capital markets and increases further the EU’s attractiveness as a destination for foreign 
investments.  This  complements  the  EU  agenda  for  free  and  fair  trade.  The  EU’s  equivalence 
regime  offers  access  for  third  country  operators  to  EU  markets  in  certain  areas,  subject  to 

1 See, for example, Introductory Statement by Mario Draghi, President of the ECB, at the ECON committee of 
the European Parliament, Brussels, 28 January 2019 
(https://www.ecb.europa.eu/press/key/date/2019/html/ecb.sp190128~8b43137b4f.en.html).  
2 On  25  January  2019  the  Commission  launched  a  targeted  consultation  on  the  euro  and  foreign  exchange 
markets,  which  is  one  of  the  key  follow-up  action  to  the  Commission  Communication  of  December  2018 
‘Towards a stronger international role of the euro’. This consultation, which closes on 31 March, aims to getting 
the views of stakeholders on the role of the euro in currency markets and assessing whether trading the euro is 
conducted efficiently and on the basis of adequate market liquidity. 

1 

 
                                                 
equivalent  regulatory  and  supervisory  standards  in  the  third  country  concerned.  At  the  same 
time, after the United Kingdom leaves the EU, the Capital Markets Union will need to further develop 
its critical functions for providing and supervising capital market services by sustaining liquidity and 
avoiding regional fragmentation. For example, new rules for central counterparties will ensure a more 
consistent  and  robust  supervision  of  central  counterparties  in  EU  and  third  countries.  European 
consumers,  investors  and  businesses  will  also  benefit  from  stronger  and  more  integrated  financial 
markets,  thanks  to  the  reform  of  the  EU’s  supervisory  architecture.  A  state-of-the-art  anti-money 
laundering  framework  will  safeguard  the  integrity  of  EU  financial  markets.  Going  forward,  further 
steps will be needed to ensure that market infrastructure keeps up with growing transaction volumes, 
information is accessible and comparable, investors’ rights are protected and sufficiently harmonised 
and that there is not regulatory arbitrage or a race to the bottom in terms of supervisory standards.  

Capital markets need to transform to ensure an orderly transition in line with the goals of the 
UN 2030 Agenda for Sustainable Development and the Paris Climate Agreement. Europe is at the 
forefront  of  international  efforts  to  deliver  on  these  commitments.  The  EU  will  be  rapidly 
decarbonising  the economy  with  a  view  to  climate  neutrality  in  20503 and  resilience to  more severe 
climate-related events will become increasingly more urgent4. The measures set out in the Action Plan 
on Sustainable Finance5 will help to reorient private and public capital flows towards more sustainable 
investments, including through new rules that will allow investors to make better-informed decisions 
about the sustainability of their investments. The Commission will report on the implementation of the 
Action Plan in 2019. 

In today’s digital world, to prepare our economies for the future we must reap the benefits of 
financial technology while safeguarding consumer protection, as set out in the FinTech Action 
Plan6. The financial sector is already changing due to new technologies, such as artificial intelligence, 
big  data  or  blockchain  networks.  Fintech  can  build  interconnections  between  pan-European  markets 
and local ecosystems more efficiently and cost-effectively. It can also stimulate innovation within the 
EU and the international competitiveness of EU capital markets. 

Overall,  Europe’s  capital  markets  have  continued  to  develop  over  the  past  5  years.  The  total 
market capitalisation of listed companies in the EU is now above pre-crisis levels and the proportion 
of  EU  initial  public  offerings  in  the  global  market  continues  to  be  at  roughly  30 %.  Listed  equity 
issued by non-financial companies went from around 36 % of EU gross domestic product in 2014 to 
41 %  in  2018.  Debt  securities  grew  from  8 %  to  10 %.  Cross-border  distribution  of  EU-labelled 
investment funds has also grown steadily. These trends are positive signs for the further development 
of Europe’s capital markets. 

3 COM(2018)773  A  clean  planet  for  all:  a  European  strategic  long-term  vision  for  a  prosperous,  modern, 
competitive and climate neutral economy 
4 Global  warming  of  1.5 °C  An  IPCC  Special  Report  on  the  impacts  of  global  warming  of  1.5 °C  above  pre-
industrial levels and related global greenhouse gas emission pathways, in the context of strengthening the global 
response to the threat of climate change, sustainable development, and efforts to eradicate poverty. 
5 Communication  from  the  Commission  to  the  European  Parliament,  the  European  Council,  the  Council,  the 
European  Central  Bank,  the  European  Economic  and  Social  Committee  and  the  Committee  of  the  Regions 
‘Action Plan: Financing Sustainable Growth’, COM/2018/097 final, 8.3.2018. 
6  FinTech Action Plan: for a more competitive and innovative European financial sector, COM(2018) 109 final. 

2 

 
 
                                                 
Source:   European Capital Markets Institute, European Central Bank, Federal Reserve and own calculations 
Notes:  While the EU and US markets are not entirely comparable, the figure shows that capital markets in the EU-28 

represent around 160% of the GDP of the Union whereas they represent 300% of the GDP in the United States; 
Stock market capitalisation and bonds issued by financial and non-financial corporations; the average of the top 5 
markets in the European Union was obtained as a GDP-weighted average for Netherlands, Sweden, Ireland, 
Denmark and Luxembourg with weights of 41%, 25%, 17%, 15% and 2%, respectively. 

As of today, the Commission has delivered on its commitments. It has proposed the basic building 
blocks  of  the  Capital  Markets  Union  around  three  mutually  reinforcing  dimensions:  the  EU  Single 
Market, clear and proportionate rules, and efficient supervision. However, the active involvement of 
Member States as well as of national and EU-level stakeholders remains crucial to a successful Capital 
Markets  Union.  National  reforms  and  measures  are  essential  to  strengthen  capital  markets  and 
companies,  financial  market  participants  and  investors  should  make  full  use  of  these  new 
opportunities.  For  example,  national  tax  regimes  and  the  efficiency  and  duration  of  insolvency 
procedures  have  a  clear  impact  on  cross-border  investments  and  capital  flows.  In  the  European 
Semester  such  issues  are  reviewed  in  the  country  reports  and  several  Member  States  have  received 
advice or formal country specific recommendations from the Council addressing issues such as debt-
equity tax bias and insolvency procedures.  

2. 

PROGRESS ACHIEVED UNDER THIS MANDATE 

The Commission has tabled all legislative proposals set out in the Capital Markets Union Action 
Plan and Mid-term review to put in place the key building blocks of the Capital Markets Union7. 
In  addition  to  the  proposals  presented  below,  the  Commission  has  adopted  other  complementary 
proposals relevant to the Capital Markets Union. These include the proposals on a Common corporate 

7  Communication  ‘Action  Plan  on  Building  a  Capital  Markets  Union’,  COM(2015)  468,  30.9.2015; 
Communication  ‘On  the  Mid-Term  Review  of  the  Capital  Markets  Union  Action  Plan’,  COM(2017)  292, 
8.6.2017. 

3 

 
 
 
                                                 
tax base (CCTB)8 and Common consolidated corporate tax base (CCCTB), which will be implemented 
through  a  two-step  procedure,  and  the  proposal  on  a  framework  for  the  recovery  and  resolution  of 
central counterparties. In addition, in February 2019, the co-legislators agreed on a targeted reform of 
the  European  Market  Infrastructure  Regulation  (EMIR)  to  provide  simpler  and  more  proportionate 
rules for over-the-counter derivatives. 

In November 2018, the Commission called on the co-legislators to complete the key building blocks 
of  the  Capital  Markets  Union  before  the  European  Parliament  elections  in  May  2019.  The 
Commission  welcomes  the  political  engagement  of  the  European  Parliament  and  the  Council, 
which has resulted in a political agreement on 10 proposals. 

However, regulatory reform is only one part of the required change. This is why, in addition to 
the legislative programme, the Capital Markets Union Action Plan and Mid-term review included 
a number of non-legislative measures, which the Commission has delivered9. These measures are 
important  in  their  own  right  to  boost  investor  confidence,  strengthen  key  market  infrastructure  and 
open new funding channels. 

It was always clear that a fully-fledged Capital Markets Union would not be created over night. 
While  the  measures  taken  so  far  have  started  to  have  an  impact,  it  will  take  time  for  the  full 
benefits  of  the  legislative  proposals  presented  by  the  Commission  to  fully  materialise  and  for  their 
effects  to  be  felt  on  the  ground.  It  is  now  for  national  authorities  and  market  operators  to  seize  the 
opportunities created by Capital Markets Union reforms, to the benefit of the Economic and Monetary 
Union and the wider EU economy. 

2.1.  Making  the  most  of  the  Single  Market  through  new  European  products,  labels  and 

passports 

The  Commission  has  proposed  six  legislative  measures  to  introduce  new  EU-wide  rules  for 
products,  labels  and  passports.  The  European  Parliament  and  the  Council  have  adopted  or 
reached a political agreement on five proposals. Urgent progress is needed on the remaining one. 

  The Regulations on European venture capital and social entrepreneurship funds, adopted by 
the co-legislators in October 2017 aim to boost investment into venture capital and social projects. 
They will make it easier for investors to invest in innovative small and medium-sized companies 
by  opening  up  the  regulation  to  fund  managers  of  all  sizes  and  by  expanding  the  range  of 
companies that can be invested in. 

  The  Regulation  harmonising 

the  securitisation 

legal  framework  and  creating  Simple, 
Transparent  and  Standardised  (STS)  securitisations, adopted in December 2017, helps build 
confidence in the securitisation market, prevent mistakes from the past from reoccurring and free 
up the balance sheets of banks. A set of regulatory and implementing technical standards are being 
developed to  specify  the  details  of  the  revamped  securitisation  framework  and  ensure  its  clarity 
and  consistent  application  in  order  to  achieve  the  policy  goals.  In  addition  to  the  Securitisation 
Regulation,  the  prudential  framework  for  banks  and  insurers  has  been  amended  in  order  to 

8 The CCTB  will address  the  current debt-bias in corporate taxation by  introducing an  'Allowance  for Growth 
and Investment' (AGI),  which  will give companies equivalent tax benefits  for equity as they  get  for debt. The 
AGI  contributes  to  a  strong  Capital  Markets  Union  by  creating  a  more  neutral  and  investment-friendly  tax 
environment. 
9 See annex 1, Commission Staff Working Document SWD(2019)99. 

4 

 
                                                 
establish a closer link between the riskiness of a securitisation position and the regulatory capital 
required. 

  The Regulation on a Pan-European Personal Pension Product, on which a political agreement 
was  reached  in  December  2018,  introduces  an  EU-wide  voluntary  pension  product  that  could 
complement  national  statutory  and  occupational  pensions  for  citizens  that  so  wish.  It  will  give 
citizens more choice when saving for retirement and help address the demographic challenges of 
ageing populations by complementing state-based and occupational pensions. 

  The co-legislators reached in February 2019 a political agreement on common rules on covered 
bonds. The harmonised rules, based on national high standards and best practice, will contribute 
to  developing  covered  bonds  as  a  stable  and  cost-effective  source  of  funding  for  EU  banks.  By 
doing so, they will expand the capacity of banks to provide financing to the real economy. They 
will also give investors a wider range of safer investment opportunities. 

  The  co-legislators  agreed  in  February  2019  on  the  package  on  facilitating  cross-border 
distribution  of  collective  investment  funds.  The  new  rules  will  make  the  cross-border 
distribution of funds simpler, quicker and cheaper. They will do so by improving the transparency 
of  national  requirements,  cutting  red  tape  and  harmonising  diverging  national  rules.  This  will 
provide investors with more choice, and reduce their costs, while safeguarding investor protection.  

  The  proposals  for  a  regulation  on  Crowdfunding,  still  under  negotiation  by  the  co-legislators, 
would  allow  platforms  to  apply  for  an  EU  licence  based  on  a  single  set  of  rules  and  would 
therefore make it possible for crowdfunding platforms to provide their services across the EU. The 
framework  would  improve  access  to  an  innovative  form  of  finance  for  businesses  in  need  of 
funding  ‒  startups  in  particular  ‒  while  ensuring  that  investors  benefit  from  strong  protection 
measures. 

To  create  new  funding  channels  for  businesses,  the  Commission  has  also  assessed  the  case  for 
European  secured  notes  for  small  and  medium-sized  loans  and  infrastructure  loans.  By 
promoting  the  use  of  loans  to  small  and  medium-sized  companies  and  infrastructure  loans  as 
collateral, European secured notes go beyond the traditional types of collateral used for covered bonds. 
European  secured  notes  could  therefore  potentially  improve  banks’  ability  to  lend,  in  particular  to 
small  and  medium-sized  companies,  and  thereby  potentially  stimulate  companies’  growth  and  job 
creation.  Based  on  advice  from  the  European  Banking  Authority,  a  consultation  with  private 
stakeholders and a feasibility study, the Commission will continue to assess whether further action is 
necessary at EU level. 

To  boost  the  confidence  of  retail  investors,  the  Commission  has  assessed  the  distribution  of 
investment  products.  This  assessment  has  identified  several  challenges  that  consumers  face  when 
looking  to  invest.  Some  of  these  challenges  were  already  addressed  by  recent  changes  to  EU 
legislation that improve transparency and strengthen retail investor protection. The Commission will 
continue to monitor and assess the effectiveness and appropriateness of the regulatory framework for 
retail  investors,  including  when  reviewing  the  Markets  in  Financial  Instruments  Directive  and  the 
Packaged Retail and Insurance-based Investment Products Regulation. 

The  Commission  has  also  been  assessing  several  instruments  that  could  help  retail  investors 
participate  in  capital  markets.  Employee  share-ownership  schemes  give  retail  investors  some 
experience in investing in shares. Investment savings accounts can help more generally to reduce 
administrative burden and give investors an incentive to participate in capital markets, helped 

5 

 
by  transparent  conditions.  The  Commission  will  continue  to  work  with  private  stakeholders  to 
develop these instruments. 

Also  in  the  area  of  retail  investment,  the  Commission  is  examining  current  technology-driven 
digital  interfaces  that  could  help  individuals  find  suitable  and  cost-effective  retail  investment 
products  in  a  reliable,  transparent  and  trustworthy  way.  A  study  expected  later  this  year  will  assess 
possible  scenarios  for  developing  an  online  digital  tool  that  can  support  retail  investors  in  their 
investment decisions. 

Finally,  the  Commission  has  undertaken  a  study  on  potential  tax  obstacles  to  cross-border 
investment by pension funds and life insurers. The Commission intends to discuss the results of the 
study with the Member States with a view to removing any identified obstacles on a voluntary basis 
before possibly taking legal action. 

2.2.  Supporting businesses and investors through clearer and simpler rules 

The  Commission  has  proposed  five  legislative  measures  to  provide  simpler,  clearer  and  more 
proportionate  rules  for  entrepreneurs,  businesses  and  financial  institutions.  The  European 
Parliament  and the  Council  have  adopted  or  reached  a  political  agreement  on four  proposals. 
Further progress is needed on the remaining one. 

  The  Prospectus  Regulation,  adopted  by  the  co-legislators  in  June  2017,  cuts  red  tape  for 
companies seeking financing opportunities, by making a prospectus simple to produce and clear 
for investors to understand. 

  More  proportionate  and  risk-sensitive  rules  for  investment  firms were agreed on by the co-
legislators in February 2019. The new rules will ensure a level playing field between the large and 
systemic financial institutions, which will be subject to the same rules and supervision as banks, 
and  introduce  simpler  and  less  burdensome  prudential  rules  for  non-systemic  investment  firms. 
This  balanced  approach  will  boost  competition  and  increase  investment,  while  safeguarding 
financial stability. 

  A political agreement on the Directive on preventive restructuring frameworks, second chance 
and  measures  to  increase  the  efficiency  of  restructuring,  insolvency  and  discharge 
procedures was reached in December 2018. It will help viable companies in financial difficulties 
to be restructured efficiently and allow honest entrepreneurs to benefit from a second chance after 
overcoming  bankruptcy.  This  is  crucial  for  ensuring  a  dynamic  business  environment  that  also 
promotes innovation, avoids unnecessary liquidations, the loss of know-how and jobs and prevents 
the accumulation of non-performing loans. 

  New  rules  that  will  facilitate  financing  through  capital  markets  for  small  businesses  were 
agreed  by  co-legislators  in  March  2019.  The  proposed  rules  will  cut  red  tape  for  small  and 
medium-sized  companies  trying  to  access  ‘SME  Growth  Markets’,  a  new  category  of  trading 
venue  dedicated  to  small  issuers,  by  introducing  a  more  proportionate  approach  to  support  the 
listing  of  small  and  medium-sized  companies.  The  proposal  also  aims  to  safeguard  investor 
protection and market integrity. 

  More work is needed to reach an agreement on the proposed regulation on the law applicable to 
the third-party effects of assignments of claims. The regulation will significantly increase legal 
certainty ‒ and thus promote cross-border investment ‒ by determining which national law applies 
to the effects on third parties where a claim is assigned cross-border. 

6 

 
As  long-term  investors,  insurers  have  a  significant  role  in  financing  the  real  economy  by  investing 
more in equity. The Commission hasadopted an amendment to the Solvency II framework for the 
prudential  treatment  of  qualifying  private  equity  and  privately  placed  debt.  Additionally,  the 
Commission has adopted a more tailored prudential treatment of long-term equity investments 
by  insurance  companies.  The  amendments  are  now  undergoing  scrutiny  from  the  co-legislators. 
Thanks  to  these  changes,  qualifying  private  equity  investments  by  insurers  will  now  benefit  from  a 
lower  capital  requirement,  in  particular  where  such  investments  qualify  as  long-term  equity. 
Moreover, for privately placed debt, in the new rules the Commission allows for alternatives to the use 
of  external  ratings  for  the  calculation  of  capital  requirements.  This  will  remove  the  current 
disadvantages of privately placed debt vis-à-vis investment grade corporate bonds. 

The Commission has reviewed the functioning of corporate bond markets in the EU. For larger 
companies, corporate bonds are an important way of raising debt finance on a larger scale. While the 
issuance of corporate bonds by non-financial companies has increased in the EU over the past decade, 
this instrument still has untapped potential as a funding tool for companies. The Commission has set 
up an expert group to assess EU corporate markets. Its mandate was to provide a cross-market analysis 
of  corporate  bond  markets  and  to  give  recommendations  on  how  to  improve  their  functioning.  The 
Commission has already taken action based on the expert group’s recommendations, such as adopting 
a  legislative  proposal  on  promoting  SME  listing  to  reduce  the  administrative  burden  for  issuers  of 
corporate bonds. The assessment of the corporate bonds markets will also ‒ as appropriate ‒ feed into 
future reviews of EU legislation. 

The  Commission  has  also  committed  to  identifying  and  promoting  best  practices  for  private 
placements. Markets for private placement of debt can broaden the availability of finance for unlisted 
medium-sized  companies.  A  study 10  showed  that  private  placement  of  debt  instruments  with 
institutional investors could play a greater role in financing medium-sized companies in the future. It 
also highlighted a considerable growth potential for private placements in the EU due to new domestic 
markets and an increase in cross-border activities. Building on the study’s findings, the Commission is 
encouraging Member States to support the development of private placements as an alternative source 
of financing. 

In addition to the action already taken by the Commission, there are several ongoing actions, which 
will feed into the Commission’s future work. These include a study on supply chain finance and a 
study  to  assess  the  situation  of  SME  research  coverage  and  the  impact  of  the  new  Markets  in 
Financial Instruments Directive rules on the unbundling of research payment. 

To harness  the  potential of  innovation, the  Commission  also  asked  an expert  group11 to  assess  the 
rules for innovative business models and technologies. The results of the studies and analyses still 
need to  be  reviewed  and it  will be  up to the  next  Commission  to  decide on  any  potential follow-up 
action. 

The European Innovation Council, now in its final piloting phase, will bring together EU schemes 
into a one-stop-shop for high potential innovators, adapted to the needs of breakthrough and disruptive 
innovations.  Set  to  become  fully  operational  with  the  next  EU  research  and  innovation  programme, 
Horizon  Europe,  the  EIC  will  provide  grants  and  blended  finance  (combined  grant-equity)  to 
overcome market gaps in financing high risk innovation and crowd in private investment. 

10 See Commission webpage on EU markets for private placements. 
11 Regulatory Obstacles to Financial Innovation Expert Group 

7 

 
                                                 
A stable investment environment is crucial for encouraging more investment in the EU. On 19 
July 2018, the Commission adopted a Communication that clarifies how EU law protects investments 
and how investors can enforce their rights under EU law before national administrations and courts12. 

The protection of investment has become even more important in light of the Achmea judgment 
of 6 March 2018. This confirmed the Commission’s view that EU investors cannot rely on intra-EU 
bilateral  investment  treaties  and,  in  particular,  that  investor-State  arbitration  in  these  treaties  is 
incompatible  with  EU  law.  Following  a  dialogue  between  the  Commission  and  Member  States,  in 
January 2019 all Member States committed to terminating intra-EU bilateral investment treaties and 
the majority of Member States committed to undertake action to ensure that the Energy Charter Treaty 
cannot be used as a basis for arbitration between investors and EU Member States. 

2.3.  A more efficient supervision of EU capital markets 

The Commission has proposed two legislative measures to ensure a more integrated and efficient 
supervision of capital markets, which is central to the Capital Markets Union and necessary for 
more financial integration and more private risk sharing. Political agreement has been reached 
on one proposal. Urgent progress is needed on the remaining one: 

  Revamped rules for more robust supervision of central counterparties, agreed in March 2019, 
to  strengthen  the  EU’s  financial  stability.  This  reform  will  ensure  that  the  EU  supervisory 
framework is sufficiently robust to anticipate and mitigate risk from EU central counterparties and 
from systemic non-EU central counterparties that provide services to EU clients. 

  Good  progress    has  been  made  in  negotiations  on  the  reform  of  the  European  supervisory 
authorities  to  make  European  financial  supervision  stronger  and  more  integrated,  and  the 
proposal to  strengthen  the  supervisory  framework  for  anti-money  laundering  and  terrorist 
financing, which amended the original proposal in September 201813. The Commission calls on 
the  European  Parliament  and  the  Member  States  to  reach  a  political  agreement  with 
urgency, and stands ready to continue proving its full support to that end. 

Effective supervision is important for boosting retail investment, as savers need to be confident that a 
potential investment provides adequate return for the level of risk taken. In January 2019, following 
a request by the Commission, the three European supervisory authorities published the results 
of  their  first  comprehensive  analysis  of  costs  and  performance  of  the  main  categories  of 
investment products for savers, e.g. mutual funds, insurance, pension and structured products. The first 
results provide a baseline for future assessments and for further developing the reporting requirements, 
including  ‒  where  appropriate  ‒  a  possible  extension  of  the  scope  and  improvements  in  the 
methodology. 

12 Communication  from  the  Commission  to  the  European  Parliament  and  the  Council  ‘Protection  of  intra-EU 
investment’, COM/2018/547 final. 
13  The  Commission  put  forward  a  proposal  amending  the  original  ESA  proposal  with  the  objective  of 
concentrating  anti-money  laundering  powers  in  relation  to  the  financial  sector  within  the  European  Banking 
Authority and to strengthen its mandate to ensure that risks of money-laundering are effectively and consistently 
supervised by all relevant authorities and that the relevant authorities cooperate and share information. 

8 

 
                                                 
2.4.  Sustainable finance 

The Commission has adopted three legislative proposals to enable the EU financial sector to lead 
the  way  towards  a  climate  neutral,  more  resource-efficient  and  resilient  circular  economy.  The 
European  Parliament  and  the  Council  have  reached  a  political  agreement  on  two.  Progress  is 
still needed on one of the three legislative proposal: 

  The  co-legislators  are  still  deliberating  on  the  unified  EU  classification  system  (taxonomy)  to 
determine  which  economic  activities  are  environmentally  sustainable.  This  will  give  clarity  to 
investors and other economic operators on what activities can be considered to be ‘green’. It will 
also  be  a  basis  for  standards  and  labels  for  sustainable  financial  products.  The  Commission 
proposed to evaluate by the end of 2021 the appropriateness of extending the taxonomy to cover 
other sustainability objectives, in particular social objectives.  

 

In March 2019,  a political agreement was reached on the Regulation on disclosures  relating  to 
sustainable  investment  and  sustainability  risks.  The new rules will introduce consistency and 
clarity on how institutional investors should integrate environmental, social and governance (ESG) 
factors in their investment decision-making process. They will also increase transparency on ESG 
investment strategies for end-investors. 

  Finally, in February 2019 the co-legislators reached a political agreement on the regulation on EU 
climate  transition  benchmarks  and  Paris-aligned  benchmarks.  These  new  market  standards 
will  reflect  companies’  carbon  footprint  and  give  investors  clearer  information  on  how  their 
investments contribute to fighting climate change. 

A number of non-legislative measures in sustainable finance are also well under way. These include 
the  development  of  a  taxonomy  by  the  Technical  Expert  Group  on  sustainable  finance  to  define 
environmentally sustainable economic activities, which will feed into the legislative process related to 
the  Commission  proposal  for  a  unified  EU  classification  system;  a  report  by  the  Expert  Group  on 
climate-related  disclosures;  and  technical  work  on  an  EU  Green  Bond  Standard.  Building  on  the 
Technical Expert Group report, the Commission is also updating the non-binding guidelines on non-
financial information by companies and will publish them by mid- 2019. Work is also under way to 
prepare  the  ground  for  a  future  EU  Ecolabel  for  financial  products  and  assessing,  together  with  the 
European Securities and Markets Authority, whether to integrate sustainability in ratings. Lastly, the 
European  Banking  Authority,  European  Insurance  and  Occupational  Pensions  Authority,  and  the 
European Systemic Risk Board are analysing the feasibility of integrating sustainability in prudential 
requirements. 

2.5.  Local capital markets 

Boosting local capital markets is a major goal of the Capital Markets Union. Strong local markets 
particularly benefit medium-sized companies that are large enough to tap local capital markets, but too 
small  to  look  for  capital  across  borders.  Geographical  proximity  lowers  transaction  costs,  helps 
overcome cultural barriers of entrepreneurs and helps investors understand the businesses that they are 
financially supporting. It also increases the possibilities for using local savings productively. 

Developing local capital markets requires complementary action at the level of Member States, cross-
border and regional initiatives, as well as action at EU level. Many actions are taken at national level, 
including  national  strategic  plans  for  capital  market  development,  improvement  of  the  business 
environment,  public  support  for  access  to  finance.  The  Commission’s  Structural  Reform  Support 

9 

 
Service  has  provided  technical  support  for  these  national  initiatives.  Regional  cooperation  is 
encouraged in order to open up markets and promote cross-border links, facilitate foreign listing and 
investment,  linking  market  infrastructures  and  regional  harmonisation  of  rules.  At  EU  level,  the 
financial instruments offered by the European Investment Bank contribute to developing local capital 
markets by enlarging the availability of financial products and addressing the funding gap of small and 
medium-sized companies. 

3. 

CONCLUSIONS 

The  Commission  has  now  delivered  the  measures  it  committed  to  at  the  beginning  of  the 
mandate and in the mid-term review to put in place the building blocks of the Capital Markets 
Union.  These  legislative  and  non-legislative  measures  are  an  important  step  towards  more  efficient 
and liquid capital markets in the EU, where firms and investors can access market funding on equal 
terms, irrespective of where they are physically located in the Single Market. By  making it possible 
for investors and companies to access investment and funding opportunities across borders, the Capital 
Markets Union improves private risk sharing, reduces risk in the financial system and helps mitigate 
economic  shocks  in  the  euro  area  and  beyond.  Well-integrated  capital  markets  reinforce  the  Single 
Market, support the agenda for free and fair trade and make the EU an even more attractive destination 
for investment in a changing and increasingly complex geo-political environment. 

Throughout  this  mandate,  the  Commission  has  worked  closely  with  the  European  Parliament 
and the Council and has made considerable progress on many proposals. It is important that the 
co-legislators remain committed to ensuring that all pending legislation is adopted as soon as possible. 
The Commission will continue to support those efforts. However, legislation alone will not deliver the 
Capital Markets  Union. Member  States,  national  authorities  and  private stakeholders all  play  a  vital 
role in building the Capital Markets Union. 

While the Commission’s action has already started to have an effect, it will take some time for 
the full impact to be felt on the ground. However, more work is clearly needed for a vibrant Capital 
Markets Union to be in place in the EU. In any event, future action will need to reflect the impact on 
capital  markets  of  the  United  Kingdom’s  departure  from  the  EU  and  other  short  or  medium-term 
economic  and  societal  challenges.  These  include  fundamental  ‒  and  most  likely  rapid  ‒  changes 
arising  from  the  decarbonisation  of  the  economy  and  the  changing  climate,  and  technological 
developments. 

The European Council is invited to renew its commitment to the Capital Markets Union and endorse 
these efforts for its next Strategic Agenda. This is essential for the Single Market, for the Economic 
and Monetary Union and a strong euro, and ultimately for the EU’s global competitiveness. 

10 

 
 4.    OVERVIEW OF THE PROGRESS ON THE LEGISLATIVE FILES OF THE CAPITAL MARKETS UNION 

POLICY DESCRIPTION 

European Parliament 

Council of the European 
Union 

CAPITAL MARKETS UNION 

Securitisation  

Prospectus 

European venture capital funds (EuVECA) 

Adopted 

Adopted 

Adopted 

Adopted 

Adopted 

Adopted 

Pan-European personal pension product (PEPP) 

Political agreement 

Political agreement 

Covered bonds 

Crowdfunding 

Political agreement 

Political agreement 

Negotiating mandate 

No agreement 

Cross-border distribution of collective investment funds 

Political agreement 

Political agreement 

Investment firms review 

Political agreement 

Political agreement 

Preventive restructuring, second chance and efficiency of 
procedures 

Political agreement 

Political agreement 

Promotion of SME growth markets 

Political agreement 

Political agreement 

Applicable law to third-party effects of assignment of 
claims  

Negotiating mandate 

No agreement 

European Supervisory Authorities review, including 
reinforced anti-money laundering rules 

Negotiating mandate 

Negotiating mandate 

European market infrastructure regulation (supervision) 

Political agreement 

Political agreement 

SUSTAINABLE FINANCE 

Sustainable finance: Taxonomy 

No agreement 

No agreement 

Sustainable finance: Disclosure 

Political agreement 

Political agreement 

Sustainable finance: Low-carbon and positive carbon 

Political agreement 

Political agreement 

11 

 
 
 
impact 

OTHER PROPOSALS OF RELEVANCE TO THE CAPITAL MARKETS UNION 

Common consolidated corporate tax base 

Report adopted 

No agreement 

European market infrastructure regulation (REFIT) 

Political agreement 

Political agreement 

Recovery and resolution of central counterparties 

Negotiating mandate 

No agreement 

12