UK: Setting The Scene For The Capital Markets Union

Last Updated: 30 December 2014
Article by Tim Rawlings

The Capital Markets Union (CMU) is a flagship initiative in the European Commission's agenda for financial services during the next five years. This "concept under construction" has already caused much debate as stakeholders attempt to define the CMU and set its primary aims and principles. However, the real debate is only just starting. The agenda will evolve rapidly over the coming months with a Commission consultation paper expected in Q1 2015 and a road map in Q3 2015.

To set the scene for the consultation paper, we focus on a stylised view of the CMU as an agenda to develop an integrated and fully developed single EU capital market to promote growth. The CMU will act as an 'umbrella' policy programme, covering existing as well as some new initiatives.

Old wine in new bottles?

The CMU is not a new idea, but the breadth and ambition of this latest iteration of the agenda is. At its heart is the idea of a single EU capital market providing alternatives to traditional bank finance, which currently dominates in the EU. This idea has been an aim of the EU since the 1966 Segre Report ('The Development of a European Capital Market') and it has featured in a number of policy agendas such as the 1999 Financial Services Action Plan. At its core sits the free movement of capital. The CMU represents the rebranding of this old idea and the next phase of integration and development.

To policymakers, while bank finance has a number of advantages (such as overcoming information asymmetries in the small and medium-sized enterprise (SME) market) as banks rearrange their balance sheets in response to market and regulatory pressures, stagnating growth in parts of the EU and high unemployment, alternative methods of raising finance are needed. A successful CMU could result in deeper pools of finance, lower costs of capital, increased SME and infrastructure finance, diversified avenues to raise capital, broader investment opportunities and increased financial stability.

Comparison with the Banking Union

The nomenclature adopted for the CMU and its similarity to the Banking Union naturally leads one to assume the foundations of the two agendas are the same. This assumption is wrong. The Banking Union and the CMU differ in two important ways:

  • The driver behind the Banking Union is to further financial stability while the driver for the CMU is to increase jobs, economic growth and develop a more resilient financial system. As a secondary driver the CMU aims to reduce the dependence in the EU on bank finance;
  • The CMU agenda is seeking to facilitate the growth of new or underdeveloped capital markets while the Banking Union tackles the supervision and regulation of a developed and mature market within the existing market dynamics. 

Identifying these two differences is key to understanding the approach, the likely initiatives and the priorities of the CMU, which does not have a supervisory driven agenda. It is these differences that also underlie the inclusion of all 28 member states.


As noted above, while the CMU is not a new idea the potential scope of it is. Indications to date are that the CMU will cover inter alia securitisation, private placement, covered bonds, venture capital, private equity, market infrastructure, shadow banking (including securities financing transactions (SFTs) and money market funds (MMFs)), transparency and credit risk on SMEs.

The broad scope of the financing options considered in the CMU is reflected in the mechanisms through which the CMU will be achieved, namely regulation, financial reporting, insolvency law, company law and tax. Tackling the agenda through these methods will pose new practical and political challenges for the success of the CMU.

Given the breadth of scope and ambition of the CMU agenda there is a natural tendency to break it down into segments as above, e.g. securitisation. This is helpful when tackling the detail of initiatives, but if the goal of the CMU is to be achieved then a holistic approach also needs to be taken. Integrating these segments into a network and calibrating existing regimes will be necessary in order to analyse if they will produce the development and innovation desired to finance economic growth.

The broad scope of the CMU and a holistic approach will be key for ensuring finance is available at all stages of business growth, from start-up money to IPO and beyond.

Aligning outcomes to end users

The CMU aims to provide the framework to allow capital markets to develop further. Achieving this will require a cultural shift by businesses and investors. Central challenges to the CMU will be to increase cross border sources of finance and investment opportunities, and to consider alternative sources of finance such as venture capital.

The response to this will require new and innovative techniques from all concerned. Existing regulatory tools are designed for stability in an existing market, not growing what in some respects would be a new market. A risk of the CMU is that the framework for a single EU market is created that is not that required by end users i.e. the corporates seeking to raise finance and investors seeking returns.

CMU initiatives will need to be aligned to the needs of end users. Only by tailoring the framework to end users will they engage with it to develop capital markets.

Financial stability and supervision

Growth must be balanced with financial stability. This means the CMU is not likely to see significant revision or repeal of existing initiatives. As a result of the drivers of the CMU, centralisation of supervision is secondary to a development framework that facilitates the growth of EU Capital Markets. Supervision will remain a central pillar in achieving integration of capital markets and in ensuring financial stability through the existing supervisory structure.

What should stakeholders be doing?

The Commission's timetable to deliver a roadmap in Q3 2015 is ambitious, but given the priority placed on the CMU it is unlikely this timetable will be allowed to slip too far. The scope and goals of the CMU mean it has the potential to have a broad market impact and open up strategic business opportunities for new, or existing, lines of business.

With the consultation paper scheduled in the New Year, now is a prime time for markets participants and end users to evaluate the barriers that need to be overcome to achieve a more integrated EU capital market.  Engaging early to help shape the debate offers the best chance of an effective programme for the CMU.

Reflecting the emphasis placed on the CMU agenda by the Commission to date, its scope, timetable and potential market impact, Deloitte's EMEA Centre for Regulatory Strategy has identified Capital Markets Union as one of the ten key areas of regulatory focus for financial markets in 2015. For more information visit

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions