How can the CMU and Banking Union contribute to European sovereignty and economic recovery ?

Par Edouard-François de Lencquesaing

Confrontations Europe, the German Embassy in France and the Dutch Embassy in France, organized on september 17 a roundtable on the following topic : How can the CMU and Banking Union contribute to European sovereignty and economic recovery ? Edouard-Francois de Lencquesaing, Confrontations Europe’s Treasurer and Financial regulation advisor, offers an analysis of the discussions.

Confrontations Europe, in partnership with the German and Dutch Embassies in France, organized a conference on 17 September on the topic “How can the CMU and Banking Union contribute to European sovereignty and economic recovery?” This debate follows a first conference organized on 2 October 2020 in partnership with the Dutch Embassy in France right after the publication of the Commission action plan on the Capital Markets Union (CMU). This second session is a prolongation of the first discussion enlarged to Germany, now bringing together three major Member States for financial integration in Europe: France, Germany and the Netherlands, represented by:

  • Jörg Kukies, State Secretary for Financial Market and European policy at the German Federal Ministry of Finance;
  • Emmanuel Moulin, Director General of the French Treasury;
  • Christiaan Rebergen, Treasurer-General at the Dutch Ministry of Finance.

This debate fits in Confrontations Europe’s strategy to prioritize the CMU and Banking Union (BU) as key instrumental milestones for European long-term investments and recovery strategy. CMU and BU are not mere technical or legislative tools but are at the very core of a coherent European strategy to address profound societal issues. In this context, Confrontations Europe identifies four major needs for the development of deep and liquid capital markets in the EU :

  • Significant reduction of CO2, in line with the ambitions of the European Green Deal aiming at decarbonizing the European economy, by 2050;
  • Divestment of non-amortized capital not compatible with agreed CO2 reduction levels, before 2030;
  • Addressing the already tangible increase of climate risk caused by global warming ;
  • Financing the fourth industrial revolution with the digital challenge and its impact on society.

Moreover, both the CMU and BU aim to make the European financial system more resilient, leading to significant reduction of financial markets fragmentation, thus increasing competitiveness both for markets participants and customers.

Our European culture of credit financing is no longer adapted to these challenges. These financially risky investments require new profiles of individual risk-takers and investors, both institutional and individual. We must therefore redefine our European mix of credit and market financing. This new mix should rely on competitive intermediaries – investment banks, brokers, fund managers, long-term investors – who need to have sufficient critical mass compared to their American or British competitors. This objective relies on a common strategic vision and appropriate regulatory framework around market infrastructures and investment instruments such as securitization, long-term investments (ELTIF) or pension strategies.

This evolution is not only technical but also addresses cultural changes. It must therefore be supported by strong political dynamic and pragmatic project management processes based on transparency, a tangible set of measured progress reports and a more ambitious supervisory framework, guaranteeing a real European single market for financial services.

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