So there is still much to be done on the CMU project and Brexit makes these issues even more pressing. Let me highlight a few initiatives. First, the European Commission signalled that it would make CMU a centrepiece of the forthcoming legislative agenda and has already set up a high-level forum, composed of experts from different industry sectors, which has started work on proposals for the next CMU Action Plan.2 Second, a high-level working group created by Germany, the Netherlands and France published a proposal to relaunch CMU in 2019.3 This proposal includes recommendations for generating long-term savings opportunities, developing equity markets, enhancing cross-border financial flows, and developing debt, credit and foreign exchange financing tools with a view to increasing the international role of the euro. Last but not least, there have been industry-led initiatives such as the CEPS-ECMI task force on rebranding CMU, which put forward a market finance action plan.4 These initiatives provide valuable input for the CMU agenda. Looking ahead, I see two areas where progress is particularly needed. First, capital markets remain subject to national rules and supervision. This hampers the crossborder provision of services. Further harmonisation, for instance in the area of insolvency and taxation regimes, is needed to foster integration in the euro area. Second, if the EU27 financial markets deepen, diversify and expand across borders, there would be a clear flipside: these developments would need to be accompanied by sufficient oversight and regulatory tools to avoid regulatory arbitrage or the build-up of risks in certain parts of the system.

Most incoming banks have indicated Germany, Ireland, the Netherlands or France as their new main location in the euro area. This pattern also seems to apply to the relocation of activities beyond banking. Public statements and market intelligence suggest that a sizeable fraction of asset management firms and insurance companies that are relocating activities from the United Kingdom as a result of Brexit have moved to either Ireland or Luxembourg. And speaking here in Amsterdam, I should note that the Netherlands is attracting a substantial amount of trading platforms, exchanges and fintech companies. The persistence of such dynamics, and the emergence of a clearly multi-centric euro area financial system, could raise a number of challenges. In particular, without further progress on banking and capital markets union, a more fragmented financial structure could affect the ability of investors and companies from a country experiencing a negative shock to access investment and funding opportunities in unaffected countries (private risk-sharing). It could also create regulatory and supervisory challenges: domestic capital markets within the EU are currently subject to national rules and supervision; the differences in regimes could further inhibit the integration of markets and perhaps incentivise regulatory arbitrage. Brexit and the need for renewed momentum on the capital markets union and banking union Indeed, from a global standpoint, European capital markets are too small and fragmented. The goal of the capital markets union (or CMU) is to develop an ecosystem that will allow the development of strong European financial markets and intermediaries which are able to compete internationally.