A Capital Market Union For Europe

Author/Editor:

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

Publication Date:

September 10, 2019

Electronic Access:

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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

Price:

$10.00 (Academic Rate:$10.00)

Format:

Paper

Pages:

30

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