Europe needs an efficient capital market to overcome the enormous financial challenges of the coming years. ECB President Lagarde has a suggestion.
According to ECB President Christine Lagarde, the fragmentation of the European capital market could also be overcome with the help of a common stock market supervisory authority. While the strong capital market in the USA has benefited from the SEC’s uniform supervision for decades, direct control in Europe largely takes place at the national level, Lagarde said on Friday at a banking congress in Frankfurt. This leads to fragmentation in the application of EU regulations.
“The creation of a European Securities and Exchange Commission, for example by expanding the powers of ESMA, could be the solution,” said Lagarde, referring to the European Securities and Markets Authority (ESMA). To do this, in Lagarde’s opinion, ESMA would need “a broad mandate that also includes direct supervision in order to reduce systemic risks”, such as those posed by large cross-border companies.
The European Central Bank (ECB) has long been pushing for progress in unifying financial and capital markets in Europe, including the further development of the Capital Markets Union. This is essentially about reducing bureaucratic hurdles between the individual states of the European Union in order to give companies more opportunities to raise money. The EU Commission’s plans for this have been on the table since 2015.
“Despite two action plans from the European Commission, the European capital market remains fragmented,” Lagarde noted. However, huge amounts of capital are required for the green restructuring of the economy – including from private investors. “We will not achieve these transitions if we do not get the Capital Markets Union back on track,” said Lagarde. The Europeans must build on their “goodwill and move forward, otherwise we risk that Europe will not be able to overcome the challenges ahead,” warned the ECB President.
Source: Stern
