At the end of its first phase, CMU has had a promising start but for it to make a real lasting impact reform must continue beyond 2019

Today the European Commission delivered its latest Capital Markets Union progress report, and while it makes clear how much has been achieved since the flagship project was launched in September 2015, there also remain some significant pieces of unfinished business.

At a time when Europe’s capital markets are facing some of their toughest challenges since the global financial crisis, with Brexit, global competition, changes in technology, and political uncertainty creating a risk of volatility, efforts to deepen and unify EU capital markets are more important than ever.

Key priorities for this legislative cycle

The CMU project to date has had some notable achievements, which are noted in the Commission report. Time is short for further action within this legislative cycle, but progress is still possible in areas such as the review of the European System of Financial Supervision, where agreement on proposals to improve transparency around the work of European supervisors should be prioritised.

The next phase of Capital Markets Union

While these final weeks of the legislative cycle are important for cementing the progress that has been made to date, it is perhaps even more important to look ahead to the next phase of CMU. In order to truly realise the overarching aim of creating deeper, more diversified and better joined-up capital markets, which boost European economic growth, continued effort beyond this current Commission will be essential.

CMU should be given even greater emphasis in the next Commission, with an ambitious agenda and a vision for the future.  Some key structural reforms remain, such as the harmonisation of corporate insolvency rules across Europe and changes to withholding tax to ensure there are uniform pan-EU processes in place, along with tackling other taxation issues that create barriers to cross-border trade.

In emerging priority areas such as sustainable finance, continued progress on the creation of a clear classification structure for sustainable finance investments should be a top priority. Such a taxonomy, which will provide investors with a clear framework by which to judge the sustainability credentials of investments, is a vital cornerstone for developing an overall greener and more transparent financial system. A well-constructed CMU will be essential for generating increased private sector finance investment into sustainable financial assets.

Maintaining political momentum at EU member state level to address such long-term barriers and fragmentation will be key. These are challenging areas and meaningful reform will require concerted effort over time, but achieving such a vision for integrated and competitive European capital markets is vital for supporting the continent’s prosperity and long-term growth prospects.