Wednesday, April 13, 2016
Capital Markets Union is No One-Size-Fits-All Solution
The European Commission aims at enhancing the depth of capital markets as well as fostering capital market integration by building a so-called Capital Markets Union (CMU). A collaborative study of the Cologne Institute for Economic Research (IW Köln) and the College of Europe (CoE) finds that the CMU can enhance SME financing but also produces winners and losers.
The European Commission aims at fostering the financing options for companies, especially for small and medium-sized companies (SMEs) which make up the bulk of all European companies. A crisis experience was that even sound companies whose banks got into distress had to face restrictive access to finance. Fostering capital market access for SMEs should provide them with additional financing options and lessen the dependency of SMEs to bank financing. And indeed, the capital markets depth of the EU differs from the US. While approximately 80 percent of corporate debt financing depends on capital markets in the US, 90 percent of debt financing depends on banks in the EU...''