A Capital Market Union For Europe

Author/Editor:

Ashok Vir Bhatia ; Srobona Mitra ; Anke Weber ; Shekhar Aiyar ; Luiza Antoun de Almeida ; Cristina Cuervo ; Andre O Santos ; Tryggvi Gudmundsson

Publication Date:

September 10, 2019

Electronic Access:

Free Download. Use the free Adobe Acrobat Reader to view this PDF file

Disclaimer: This Staff Discussion Note represents the views of the authors and does not necessarily represent IMF views or IMF policy. The views expressed herein should be attributed to the authors and not to the IMF, its Executive Board, or its management. Staff Discussion Notes are published to elicit comments and to further debate.

Summary:

This note weighs the merits of a capital market union (CMU) for Europe, identifies major obstacles in its path, and recommends a set of carefully targeted policy actions. European capital markets are relatively small, resulting in strong bank-dependence, and are split sharply along national lines. Results include an uneven playing field in terms of corporate funding costs, the rationing out of collateral-constrained firms, and limited shock absorption. The benefits of integration center on expanding financial choice, ultimately to support capital formation and resilience. Capital market development and integration would support a healthy diversity in European finance. Proceeding methodically, the note identifies three key barriers to greater capital market integration in Europe: transparency, regulatory quality, and insolvency practices. Based on these findings, the note urges three policy priorities, focused on the three barriers. There is no roadblock—such steps should prove feasible without a new grand bargain.

Series:

Staff Discussion Notes No. 19/07

Subject:

Notes:

Background Note

English

Publication Date:

September 10, 2019

ISBN/ISSN:

9781498313278/2617-6750

Stock No:

SDNEA2019007

Format:

Paper

Pages:

30

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