The consumer angle of the Capital Markets Union

BEUC NEWS - 12.03.2015

The European Commission has kicked-off an action plan to reduce companies’ reliance on banks and diversify their funding sources across the EU’s 28 member states. To this end, the Commission also published a reflection document, a so-called Green Paper, on building a Capital Markets Union.

The Commission’s bundle of possible actions would have concrete implications for consumers:

  • In order to improve access to finance, the development of alternative finance tools such as crowd funding platforms are being considered. Crowd funding is growing quickly with double growth rates annually. It’s an interesting option for small savers looking for alternatives to meagre interest rates. There is a clear determination to boost this form of financing, but crowdfunding is not without risks such as the potential loss of capital or fraud. Solutions to such risks include clear disclosure by the platform of the risks involved and essential information on the investment projects.
  • Increasing retail investors’ trust in the market so that they offer “additional opportunities to put their money at work”. This trust depends – among other factors – on two core issues: having simple and transparent products to choose from and being able to rely on strong supervisors who remove rotten apples from the market. In a Capital Markets Union where consumers shop across borders for a good investment deal, regulators need the power to act against both their own and foreign companies.

The Capital Markets Union is one the Commission’s flagships to help the economy and create more jobs. These grand objectives are laudable. But the substance should be actually more ambitious. Retail investors should be prime beneficiaries of more integrated capital markets. What we need is real competition across the EU for consumers’ savings on the basis of simple, comparable and transparent investment products. It could bring prices down for individual investors and facilitate access to the best products and services.