Financial Stability Paper 33: A European Capital Markets Union: implications for growth and stability

Capital Markets Union (CMU) is an overarching term used to describe a number of possible measures aimed at diversifying and integrating European capital markets to support economic growth and stability. This paper examines the mechanisms through which CMU could help to achieve these objectives, namely better matching of savers and borrowers and improved private-sector risk sharing, and identifies potential reform areas. In doing so, it gives consideration to the implications of greater financial diversification and integration for financial stability. The paper concludes that CMU proposals will need to be targeted at both savers and borrowers and that economic and financial stability will be better served if funds are directed towards investments less prone to capital flight during stress, including equities.