Europe's Untapped Capital Market: Rethinking Integration After the Great Financial Crisis

In the aftermath of the great financial crisis, the lack of risk diversification in the European financial system, i.e. limited cross-border banking and capital markets activities, is the main cause of the fast retrenchment of capital flows within national boundaries. Europe needs private risk sharing mechanisms to withstand asymmetric shocks, such as the recent financial crisis. An EU-wide action to promote competition among national capital markets could free up to €1.8 trillion in cash and deposits to invest cross-border in more profitable and riskier projects to create growth and jobs.

In December 2014, ECMI and CEPS formed the European Capital Markets Expert Group (ECMEG) with the aim of providing a long-term contribution to the debate on the Capital Markets Union (CMU) project, proposed by the European Commission. After an intensive, year-long research effort and in-depth discussions with ECMEG members, this final report aims to rethink financial integration policies in the European Union and to devise an EU-wide plan to remove the barriers to greater capital markets integration. It offers a methodology to identify and prioritise cross-border barriers to capital markets integration and provides a set of policy recommendations to improve its key components: price discovery, execution and enforcement. 

This report was drafted by Diego Valiante, Head of Financial Markets and Institutions at CEPS and Head of Research at ECMI, based on extensive research and discussions with the members of ECMEG, chaired by Francesco Papadia, former Director General of the European Central Bank and other international experts. ECMEG interacted with a broader Task Force including members from industry, as well as observers from EU institutions, national authorities and academia. 

Suggested citation: Valiante, D. (2016), Europe's Untapped Capital Market: Rethinking integration after the great financial crisis, CEPS Paperback, London: Rowman & Littlefield International.  

This book is co-published with Rowman and Littlefield International (RLI) and can be purchased for £24.95/$45.00 in paperback or for £24.99/$44.95 as an e-Book from the RLI website. 

It is also available for free downloading in a PDF file on the CEPS website.