europe, is mostly made up of smes, for which access to financial and capital markets is difficult, if not impossible. hence, we have an inconsistent trio : an economic structure mostly requesting bank finance, regulators concerned with the risks posed by banks ” activity, and banks consequently stepping back from ample parts of the credit markets. how to sort ourselves out? one way is to move the european financial structure from intermediaries towards markets ( visco, 2015 ). this will indeed require national efforts, but more is needed : an integrated european - wide capital market, with harmonised and smefriendly rules. in other words, a cmu. the second question is : can we consider a european cmu a realistic project? this time my answer is much more doubtful. the idea for a cmu was first put forward by the president of the european commission before the european parliament in july 2014 ( juncker, 2014 ), in very ambitious language. last september the commission presented an action plan to transform that enlightened vision into reality ( ec, 2015 ). from one document to the other the degree of ambition was apparently scaled down. as nicolas veron ( 2015 ) recently noted, the plan “ mostly boils down to pruning existing rules and correcting some of [ the ] eu ” s own recent regulatory overreach ”. bis central bankers ’ speeches but this is supposed to be the normal business of the commission. let ” s check whether this harsh judgment is well founded. what does cmu mean in substance? it means creating a single market of non - bank financial services : the belated completion of the single market project of the “ 80s. a first attempt at merging european financial markets fifteen years ago did not succeed. in the goods market the main obstacles to integration were technical standards : harmonising them was the crucial move. in the financial services market, obstacles are of various kinds : every country has its own legal system, tax treatment, accounting standards, and prudential regulation ( danielsson et al., 2015 ). these specificities are entrenched with local costumes and traditions, and in some cases they protect national champions. harmonising the myriad of laws, taxes, and regulations in a short period of time, as the urgency of the matter would require, is extremely challenging. the most delicate problem has to do with the uk. it ’ s quite obvious that a european cmu excluding the city of london would have little sense. but the

salvatore rossi : finance for growth – a capital markets union keynote address by mr salvatore rossi, senior deputy governor of the bank of italy, at the rome investment forum 2015 “ financing long - term europe ”, rome, 11 december 2015. * * * i would like to comment on the proposal for a capital markets union ( cmu ) by raising three questions, and giving some tentative answers to all of them. the first question is : do we actually need a cmu in europe? should it really be a priority in the european policy agenda? my answer is a resounding “ yes! ”. the question may seem rhetorical, given the tide of apologetic documents, papers, and seminars ( including perhaps this one ) that have been dedicated to the project since its official launch last year. however, i think it ” s important to keep in mind the reasons for that “ yes ”, because hesitations and even open dislike are quite widespread in some countries and sectors. the fact is that the european economies, with the partial exception of the uk, are strongly dependent on banks for their financing needs. too dependent. let me explain why. a wide literature ( i have in mind for example a very recent piece of empirical research by langfield and pagano, 2015 ), shows that economic growth tends to be lower in economies with a bank - based financial structure, particularly at times of falling asset prices, and systemic risk to be higher. a “ bank bias ”, as l & p dub it, is bad, in any circumstance. but even if we believed, just for the sake of the argument, in the optimality of banking dominance in our financial systems, here comes another hard fact : also as a consequence of the new regulatory and supervisory framework, banks are less and less willing to lend money to risky borrowers such as smes, because of the heavy burden of non - performing loans which is the legacy of the crisis ; because more capital is required against risky assets, and capital is costly. requests for more capital buffers come from all international regulating bodies, both at the global level ( financial stability board, basel committee ) and at the european level ( single supervisory mechanism – ssm ), as a shield against a new, devastating financial crisis. up to now, in europe the effect has been procyclical : notwithstanding the cheap, abundant liquidity supplied by the ecb, banks are reluctant to increase lending to the real economy. the corporate sector, especially in southern