United Capital Markets of Europe

Europe is a global leader in the growing field of sustainable finance. This is one of the main findings of Capital Markets Union: Measuring progress and planning for success, a publication on the state of the art of the European Commission’s Capital Markets Union Action Plan launched in September 2015 with the aim to help build a single market for capital across the 28 EU Member States.

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Three years on, the Association for Financial Markets in Europe (AFME) with the support of nine other trade associations and international organisations representing various Global and European capital markets stakeholders – including the Climate Bond Initiative (CBI) and eight European trade associations representing stock exchanges (FESE), fund and asset management (EFAMA), retail and institutional investors (European Investors), pension funds (PensionsEurope), venture capital and private equity (InvestEurope), business angels (BAE, EBAN), and crowdfunding (ECN) – published the first report about the progress of the plan as to identify what further work needs to be done.

AFME Report
AFME’s Capital Markets Union: Measuring Progress and Planning for Success report. (Source: Eurocrowd.org)


The importance of the publication relies on the fact that small and medium enterprises are the backbone of the European growth as they represent 99% of all EU businesses whilst contributing 85% to total EU job creation.

Hence, having more diversified sources of financing in place is good for investment and business but is also essential to financial stability, mitigating the impact of potential problems in the banking sector on companies and their access to finance.

This is why Simon Lewis, Chief Executive of the Association for Financial Markets in Europe said:

The CMU’s original overarching aim of developing a single European capital market remains as compelling as when the project was launched. With Brexit on the horizon, and the prospect of Europe’s largest financial centre departing from the EU, increasing the interconnection and harmonisation of Europe’s capital markets is more important than ever.


The report has shown that the availability of pools of capital for investment has confirmed encouraging improvements in most EU countries in recent years:

Over the last five years, the total amount of EU household savings in capital markets assets (listed equity, bonds, investment fund shares, life insurance and pension funds) has increased from 114% of GDP in the period 2012-16 to 118.2% of GDP in 2017, led by the accumulation of household retirement savings. However, although the average EU household accumulates savings at around twice the rate as the US, EU households invest 35% of those savings in low-yield conservative instruments like cash and deposits while the US households allocate only invest 15% in such instruments.

Moreover, according to the Authors of the study,  European capital markets have shown a promising trend towards greater integration since the aftermath of the financial crisis after the repatriation of some market activities and funding to home countries.

capital markets integrationHowever, European companies continue to over rely on bank lending:

only 14% of new external funding by EU non-financial corporates (NFC 2) in 2017 was through bonds or public equity, with the remainder funded through bank lending. This proportion has increased from 13% on average during 2012-16 and risen significantly from 7% in 2007, most recently led by bond issuance in a low interest rate environment and continuing central bank quantitative easing measures.

denmark uk estonia
Estonia, Denmark and the UK lead by availability of risk capital for SMEs. Estonia has a prominent participation of business angel investment, while Denmark and the UK have more diversified sources of risk capital from private equity and venture capital. (Adapted from AFME)

Nevertheless,  even though risk capital investments remain low relative to GDP and a significant gap continues compared with the US (0.8% of GDP vs 0.15% of GDP in the EU),

the annual amount of pre-IPO risk capital invested into SMEs in the form of venture capital, private equity (at growth stage), business angel investment, and equity crowdfunding has increased in the EU from €10.6bn in 2013 (1.4% of new external SME funding) to €22.7bn (2.5% of new external SME funding) in 2017.

pre-ipo risk capital investment

Finally, with regard to cryptocurrencies and ICOs as innovative and efficient means for market transactions, experts argue that although the number of crypto instruments has proliferated rapidly in recent years and the number of Initial Coin Offerings (ICOs) has also grown exponentially,

decentralisation and the anonymised nature of crypto transactions through ICOs pose challenges, including consumer protection, cyber risks, and risks associated with facilitating transfer of resources to finance illegal activities, money laundering, tax avoidance, or circumventing financial stability macroprudential regulations.

Therefore, they conclude that:

It may be too early to ascertain if ICOs will become a mainstream form for SME capital raising. However, it is important that European authorities continue to monitor developments and determine appropriate actions.

Find out more here.