Sign in

What is a capital markets union?


The Capital Markets Union, which is also known as the CMU is an economic policy initiative that you can find across the European Union. This policy was implemented by Jean-Claude Junker, who is the former president of the European Commission. That took place on 15th of July 2014.

Why was Capital Markets Union introduced?

The main reason on why Capital Markets Union was introduced was to create a single market for capital within the EU territory. Even though it was introduced in the year 2014, the effects were not immediately expected. Instead, it was believed to end up with achieving the objective by the end of 2019. As of now, Capital Markets Union is in place, and it is delivering positive returns to people who are living in the region.

ICMAGroup says the main reason on why Capital Markets Union was established was to address the corporate finance issues that the region has been facing on debt, such as bank loans. On the other hand, it was believed that capital markets located within the country were not integrated perfectly well with each other. To overcome these challenges, Capital Markets Union was established. On top of that, it was able to provide enhanced protection to the Eurozone against future crisis situations that could take place.

Another great initiative of Capital Markets Union was to complement the Banking Union of the European Union. Along with that, it was believed to get much-needed assistance for finishing the Economic and Monetary Union project within the country. As per the expectations of Capital Markets Union, it is believed that this would attract more than 2000 billion dollars to the European Capital Markets.

Along with the introduction of Capital Markets Union, it was identified as the New Frontier of the Single Market of Europe. That’s because it was able to provide solutions to numerous problems that were related to the European capital markets. Some of the problems include diversification of the sources of finances, market fragmentation reduction and ensuring cross border capital flows. Along with the implementation of Capital Markets Union¸ numerous small and medium sized enterprises were able to reap multiple benefits. Due to the same reason, this project was considered as something that could deliver a variety of benefits for the Banking Union of the European Union as well.

The objectives of Capital Markets Union

When learning more about Capital Markets Union, it is important to go ahead and take a look at the objectives of it. This is where you will notice that there are three main levels of objectives associated with the Capital Markets Union.

Overreaching objectives

Capital Markets Union is supposed to facilitate the financial requirements of the public sector and private sector capital markets. In fact, Capital Markets Union is looking forward to providing convenient access to the firms to proceed with gaining access to financing. These firms are facing numerous challenges when they are trying to gain access to finances because of the financial crisis that took place in the year 2010 and 2011. However, Capital Markets Union will be able to provide a solution to that and help the small and medium scale enterprises to gain access to funds that they need in a convenient manner.

Another key overreaching objective of Capital Markets Union is to ensure the sustainability and stability of the overall European financial system. This will be done with proper integration of numerous channels to the Financial System of the Europe. The overall financial stability of the European Union relies based upon the diversification of the sources of financing. When there is a crisis, it is important to make sure that there is enough access to diverse sources of financing. Then it will be possible for the enterprises to keep on operating, without having to face any major challenges. Capital Markets Union will be able to deliver assistance with that.

Strategic objectives

The strategic objectives of Capital Markets Union include enhancing the efficiency and competitiveness of the European capital markets. This will be done with the objective of fighting against market fatigue that is taking place. This objective can easily be achieved by enhancing the total range of investment opportunities that are available. Along with that, the Capital Markets Union will be able to enhance the overall effectiveness of capital markets as well.

In the meantime, Capital Markets Union is looking forward to pursuing the integration of a stable financial model. This will be able to provide much-needed assistance in fighting against integration fatigue. This will be a proven method available to reduce the overall home-biasis of the investments that are taking place. There are some challenges in achieving this even as of now. However, these objectives will be achieved in a timely manner to ensure getting the best results.

Operational objectives

One of the key operational objectives of Capital Markets Union is to enhance the availability of data across different countries that belong to the European Union. The capital market investors heavily rely on available data for making decisions. If data is not available to them, they will have to deal with numerous challenges. Along with Capital Markets Union, they will be able to overcome those challenges because they can receive convenient access to data. This will also contribute a lot towards the future betterment of the European Union.

Another operational objective of Capital Markets Union is to facilitate convenient access to the market. This may look like a complex thing to do. However, Capital Markets Union has been able to introduce a proper model for overcoming all the objectives and challenges that are associated with it. hence, businesses will not have to deal with too many obstacles when they are trying to achieve what they want.

Capital Markets Union is still in its initial stages. Hence, we can see how improvements are being introduced to this model along with time. Therefore, we will be able to see an improved state of it in the future. 

Zupyak is the world’s largest content marketing community, with over 400 000 members and 3 million articles. Explore and get your content discovered.
Read more