The chair of the European Securities and Markets Authority (ESMA) has said capital markets within the continent are facing a ‘vicious cycle’ due to four factors.
Making her opening remarks at the ESMA Conference in Paris, Verena Ross, chair of ESMA, said Europe’s capital markets are fragmented, complex, and lagging behind their global peers.
The vicious circle, said Ross, was down to:
- Struggling to nurture ingenuity and entrepreneurialism by not financing innovation and growth.
- A lack of innovation limiting dynamic and competitive European companies.
- Private capital remaining latent or exported elsewhere because of the lack of dynamic and competitive companies.
- Innovators, money, and businesses seeking out greener pastures outside of Europe.
Ross said: “This situation ultimately stifles the EU’s competitiveness and curtails our economic dynamism. Breaking this cycle is key. We must transform the vicious cycle into a virtuous cycle: One where our capital markets can seamlessly feed innovation; and where more innovation can attract new capital – creating a self-reinforcing engine of growth and prosperity.”
Ross went on to say there needs to be ‘concerted action’ in order to make the EU capital market reach its full potential. This, she said, needs clear, ambitious political vision that is backed by concrete action.
In order to make these reforms, Ross said there needs to be a more agile and modern regulatory framework. It is, she said, ‘essential’.
She added: “Simplifying and reducing reporting and administrative burdens where justified is critical, as is supervising markets in a more consistent and efficient way. Stronger convergence efforts between national authorities can help deliver uniform outcomes, but in some cases, we should also re-evaluate the existing supervisory model.”
There is also, Ross said, a great need for integration across the market.
She went on: “Simply put, a fully integrated market will provide businesses with better access to financing, and investors with broader opportunities. Integration, however, does not mean a single marketplace. It is about creating a unified system where capital can flow unimpeded, regardless of national borders, to the benefit of all. Many of our different capital markets in the EU bring valuable strengths, whether through unique expertise or sectoral specialisation.”
