Financial and Capital Markets

Free movement of capital is one of the four freedoms of the Single Market. It enables a better allocation of resources within the EU, facilitates trade across borders and favours mobility of workers. Integrated financial and capital markets, providing citizens and businesses with a wide range of financing and investment opportunities, are pivotal for the functioning of modern economies.

The EU strategy for financial markets and services covers a wide range of policy areas, such as banking, insurance, securities and investment funds, financial markets infrastructure, retail financial services and payment systems. Priorities for the following years were outlined in the Commission’s White Paper on Financial Services 2005-2010. The main objectives are to implement and continuously evaluate existing legislation, to remove any remaining barriers to the free provision of financial services and circulation of capital throughout the EU, and to enhance cooperation on the supervision of the EU financial market.

Stability of Financial Markets

The recent financial crisis has brought issues such as financial stability, financial market transparency, prudential supervision and crisis management to the forefront of the European agenda. So far, work in this area has mostly followed the Roadmaps adopted by the Council towards the end of 2007. An effective supervisory and regulatory framework is pivotal for the integration of the European financial markets and their stability. This framework has been provided by the recently reviewed Lamfalussy process. Further conceptual changes in the area of the European financial market regulation and supervision are currently under discussion.

The directives regulating the banking and insurance sectors are among the key legislative proposals designed to reinforce the stability of the financial market. The Solvency II project aims at making EU insurers more robust by introducing more sophisticated solvency requirements that better reflect the risks that companies face. The amendment of the Capital Requirements Directives concerning investment firms and credit institutions will change the rules of capital adequacy in the banking sector. A debate is also under way on ways to regulate rating agencies that assess the risk of investment products.

Financial Services for Retail Consumers

Further action is needed to create a single market for retail financial services, such as bank accounts, payments, consumer credit, mortgages, savings and insurance provided to individual consumers. Projects currently under debate include the amendment of the Regulation on Cross-Border Payments in Euro and the review of the E-Money Directive that can bring significant benefits to EU citizens.

Other topical issues include the harmonisation of the distribution of substitute investment products and the financial education of consumers. Consideration has been given to possible steps in the integration of EU mortgage markets.

Last update: 16.8.2011 16:02

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