EU funds body backs capital market union plan

The European Fund and Asset Management Association (EFAMA), representing Europe’s €28.5 trillion investment management sector, has endorsed a French proposal for a small group of European countries to advance with a capital markets union.

This move indicates growing investor frustration over the European Union’s (EU) slow progress on this long-standing goal, as reported by the Financial Times on Tuesday.

Sandro Pierri, EFAMA’s president and CEO of BNP Paribas Asset Management, warned that further delays and disagreements on reform could lead to the loss of more companies and investments in the US.

He suggested that if the union doesn’t work, it would be better for a handful of countries (four, five, or six) to align around this priority.

Large countries like France, Italy, and Spain are pushing for a plan to unify the bloc’s fragmented capital markets, an ambition outlined a decade ago.

However, the proposals faced opposition from a majority of member states, with smaller countries wary of ceding more control and regulatory powers to Brussels.

French Finance Minister Bruno Le Maire proposed in February that just three or four countries could voluntarily forge ahead with a union. Last week, French President Emmanuel Macron warned that Europe faces a “mortal” threat from economic decline.

Pierri highlighted that “most of the money” in European households’ savings, 41 per cent held in deposits and 10.5 per cent in investment funds in 2022, was “not properly mobilised.” He called for policymakers to simplify disclosures for retail investors, improve financial advice, promote tax incentives for pension funds, and auto-enrol individuals into pension schemes.

He also suggested potential reforms to create a vibrant European asset management industry to rival large fund managers in the US, emphasising the need for a proper ecosystem in Europe that requires strong asset managers.