The European Parliament has published draft report on reform to, and creation of, a Capital Markets Union (“CMU”). The European Commission has also a strategy for a savings and investments union (“SIU”), which seeks to offer EU citizens broader access to capital markets and better financing options for companies. This article considers the implications of the new publications for financial market infrastructure (“FMI”).
Background
On 12 March 2025, the European Parliament, through its Committee on Economic and Monetary Affairs, published a draft report on facilitating the financing of investments and reforms to boost European competitiveness and creating a CMU. On 19 March 2025, the European Commission issued a press release unveiling its new SIU strategy to improve the way the EU financial system channels savings to productive investments. The overarching objective of both initiatives is ultimately to boost EU economic growth and competitiveness.
Both the draft report and the SIU strategy draw on a number of other initiatives, including the Draghi Report, published on 9 September 2024, which outlines the challenges faced by industry and companies in the Single Market, and sets recommendations aimed at ensuring the EU’s economic growth, prosperity and competitiveness against an economic landscape that is continuing to be shaped by geopolitical shifts, climate challenges and rapid technological advancements.
(1) Draft CMU report
Overview
The draft report sets out a motion that calls for the Council, the Commission and member states to take a wide range of measures across three “pillars” to address the existential challenges identified by (among others) the Draghi report, and in particular the risk of economic decline leading to a gradual decline of the EU’s role in relation to the global economic and geopolitical stage.
The measures set out in the draft report are ultimately expected to inform initiatives that will be progressed by the Commission (for example through the SIU strategy discussed below).
Key points
The key measures of most relevance to FMIs include proposals to:
- Foster the creation of an EU-wide capital market that has sufficient size, liquidity, depth and transparency to attract both EU-based and international investors, through the development of legislative and non-legislative solutions.
- Integrate market infrastructures into EU-level institutional oversight through granting ESMA direct supervisory powers over pan-European market infrastructures, where these entities are currently supervised largely at member state level.
- Develop proposals to – in the Parliament’s words – repatriate clearing activities to the EU. There is no detail on how this measure might ultimate translate into detailed proposals, but it reflects the assertion in the Draghi report that one of the reasons for less efficient financial intermediation in the EU is that the post-trade environment for clearing and settlement in Europe is far less unified than – for example – the US.
- Streamline administrative procedures to improve the EU’s attractiveness as an investment destination, including aligning member states’ legislative frameworks as part of a broader simplification agenda, to ease cross-border activities.
- Recommend that the Commission rely more on regulations than directives in order to limit the scope for fragmentation, or divergence in approach, which can more easily occur where individual member states have discretion as to how to implement directives.
(2) SIU strategy
Overview
The SIU strategy follows the publication of the Competitive Growth Compass and the EU Commission’s call for evidence on savings and investments union earlier this year.
As part of a competitiveness and growth agenda, and to support the green and digital transition, the SIU aims to offer EU citizens broader access to capital markets. The main strands from a wholesale markets perspective include measures relating to: investment and financing; more supervision at EU (as opposed to member state) level. The SIU draws on existing CMU and Banking Union initiatives, but has an increased focus on the impacts on citizens, which is intended to ultimately have a broader wholesale markets impact.
The SIU has been badged by the Commission as a “horizontal enabler” that will create a financing ecosystem to benefit the EU’s strategic objectives. The SIU aims to develop integrated capital markets, alongside an integrated banking system, to effectively connect savings with the EU’s investment needs.
The Commission’s press release highlights a number of “strands” of work that are likely to impact FMIs, directly or indirectly, as follows:
- Citizens and savings – Retail savers should have more opportunity to access higher yield capital market instruments as part of their investment options.
- Investment and financing – The Commission will introduce initiatives aimed at improving capital availability and access by businesses (including SMEs) in order to stimulate investments.
- Integration and scale – To remove inefficiencies stemming from fragmentation, the Commission will focus on removing regulatory and supervisory barriers to the cross-border operation of financial market infrastructures. The Commission views this measure as enabling businesses to scale efficiently across the EU.
- Efficient supervision in the single market – The Commission will reinforce the use of convergence tools (e.g. using regulations rather than directives to minimise regulatory fragmentation), and reallocation of supervisory responsibilities between national and EU level arrangements, in order to ensure a level playing field for financial market participants irrespective of their location within the EU.
Key points
The key points set out in the SIU from an FMI perspective include:
- Consolidation of trading and post-trading infrastructures
The Draghi report highlighted that the fragmentation of post-trading and market infrastructure (i.e. as a result of multiple trading venues, CCPs and CSDs providing services in relation to the same instruments) is a longstanding challenge. The Commission aims to reduce transaction costs for financial market participants by increasing integration and interoperability of trading and post-trading infrastructures, initially through addressing barriers to integration that stem from EU regulatory rules (e.g. the Central Securities Depository Regulation). Such barriers include, for example, fragmented supervision and divergent national corporate, securities, insolvency and tax laws.
To support this work, the Commission has launched an external study to identify barriers affecting the consolidation of trading and post-trading infrastructures. It expects to publish its findings in Q3 2025. The Commission will then set out a package of legislative proposals, informed by the study, which it anticipates will include rules on central securities depositories, financial collateral, and settlement and trading market structure. The package is aimed at modernising the relevant legal framework to recognise new technologies while reducing the related regulatory burden.
This reflects the Draghi report’s recommendations that the EU should aim to create a single central counterparty platform and a single central securities depository for all securities trades, starting with the largest CCPs and CSDs and relying on the gravitational pull of these consolidated CCPs and CSDs to attract smaller CCPs and CSDs.
- Reduce fragmentation and remove barriers
The Commission highlights that many financial entities are unable to operate freely across the EU single market as a result of duplicative or differently applied requirements across member states. It also notes that trading and post-trade market infrastructure activities are highly fragmented, with financial instruments being traded on 116 regulated markets and 148 multilateral trading facilities across the EU, with 26 central securities depositories and 14 central counterparties authorised in the EU to provide settlement and clearing services. This fragmentation is understood to be preventing the scaling up of EU markets, as well as causing costs to be passed onto financial services users.
The Commission intends to reduce fragmentation and remove barriers to cross-border trading and post-trading market infrastructure activities. It also intends to remove barriers for the cross-border distribution of investment funds and to reduce operational barriers for assets managers operating as a group structure. Together, these measures are aimed at making FMIs more accessible.
- Simplification of listing rules
The SIU aims to ensure that EU listing rules are simple and that regulatory burdens on issuers and market participants are minimised, to help increase liquidity and the supply of capital to listed companies. In turn, this is intended to make EU public markets more attractive.
The Commission highlights the importance of strong, coordinated, efficient supervision of capital markets, and intends to focus on improving the current European Supervisory Authority (“ESA”) framework to facilitate more efficient cross-border collaboration and the more uniform application of regulatory requirements across member states.
The Commission will follow up with specific proposals for the upcoming review of the ESA framework. It is expected that these proposals will include the transfer of certain tasks from national competent authorities to EU-level supervisors. In this context, the Draghi report recommends that ESMA should transition from a body that coordinates national regulators into a single common regulator for all EU securities markets.
- Encourage retail investment
Among other things, the SIU focuses on incentivising savers to hold more savings in capital markets instruments, supported by a focus on ensuring the financial literacy of citizens.
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