The Capital Markets Union(CMU) is a plan of structural reforms adopted by the European Commission on September 30, 2015 which is aimed at integrating European Union (EU) capital markets. The CMU action plan sets out 33 actions to be implemented by 2019 and pursues two main goals. On the one hand, the action plan aims at channeling private savings into productive uses, with special reference to small and medium enterprises (SMEs) and infrastructure projects, and allowing new investment opportunities, greater job creation, and more economic growth. On the other, it is an attempt to integrate European financial markets to promote greater resilience to shocks, more liquid markets, lower capital costs, and, eventually, stronger competitiveness within the European economic space.

The need for a stronger European capital market is suggested by a twofold argument. On the supply side, banking has lost its traditional strength in financing the real economy. The reasons are well known: the monetary policy implemented in the past two years by the European Central Bank has dramatically lowered interest rates and, as a consequence, the intermediation margin; the combination of post-crisis prudential requirements with an increase in the amount tied up in non-performing loans has limited bank lending. On the demand side, the recession of the welfare state and the demographic trends in EU countries urge a new approach to social security: a more efficient allocation of household savings is often seen as the only alternative to the collapse of the traditional public pension system.  

The measures provided by the CMU action plan have multiple features. Some actions are on their way to being implemented, as is the case for the new regulation on simple, transparent and standardized (STS) securitization and the amendments to prudential requirement regulations for banks and insurance companies, aimed at easing investments in STS securitization and long-term infrastructure. Other measures affect existing regulations by improving or simplifying laws already in place, as with EU regulations relating to venture capital and social investments, and the Prospectus Directive. From a long-term perspective, the CMU action plan includes structural reforms aimed at removing barriers to cross-border post- trading, creating credit scoring systems for rating SME creditworthiness, and harmonizing insolvency and tax laws. Finally, some forms of increased supervisory coordination are sketched out.

2. The existence of capital markets depends on many institutional and legal preconditions. As Bernie Black famously put it, «that securities markets exist at all is magical, in a way». This magic is rare, though, and surely «it does not appear in unregulated markets». Accordingly, the approach taken by the CMU action plan is very reasonable: centralized market infrastructures, legal rules that ensure the effectiveness of equal treatment [continua..]