Integration, Sustainability and Competitiveness: Reflections and recommendations for banking and capital markets policy ahead of the next EU legislative cycle

AFME published a report issuing reflections and recommendations for banking and capital markets policy in anticipation of the next EU legislative cycle. Highlighting challenges arising from strained public finances, demographic shifts, and a significant need for annual investments, the report underscores the critical importance of fostering open, deep, and integrated capital markets to support EU corporates and citizens.
The recommendations put forth by AFME cover various facets of financial policy. They advocate for a holistic approach to enhance the competitiveness of EU banking markets, urging policymakers to assess regulatory changes in the context of global competitiveness. The removal of local capital and liquidity requirements for banking groups, streamlining the macroprudential framework, and ensuring alignment with international standards are proposed measures.
AFME emphasizes the need for concentrated efforts at the EU level in areas where rapid progress in implementing CMU measures could be transformative. Sustainable finance is highlighted as a crucial aspect, with recommendations to address usability challenges in the current framework related to sustainability criteria.
Encouraging Member State initiatives to develop markets and promoting integration for the development of European capital markets is another key recommendation. The report stresses the importance of making markets more efficient by leveraging technology to enhance liquidity, broaden investment options, and reduce operational costs.
Banking market integration is addressed, noting the challenges faced by the European banking sector in terms of low profitability. The report advocates for cross-border lending and consolidation to achieve scale and efficiency. Capital market integration is emphasized as an essential goal, with AFME urging coordinated efforts at both EU and Member State levels to achieve this objective.
Lastly, the report highlights the pensions challenge, emphasizing the importance of directing household savings into productive investments and addressing policy options, including auto-enrolment and tax incentives. AFME calls for a comprehensive and coordinated approach to unlock the benefits of integrated European capital markets, fostering economic growth, and mitigating risks associated with localized economic shocks.