Capital markets play an essential role in improving the health of the economies within which they operate but never more so than during a period of turmoil. In Europe, policymakers continue to strive to achieve their goals of supporting businesses within a low-carbon agenda, and the Capital Markets Union aims to bring unity among the continent’s capital markets to realize these objectives. Are Europe’s capital markets progressing toward this end?
The Association for Financial Markets in Europe (AFME)
Europe, like every other continent on the planet, is looking guardedly toward recovering from the deleterious effects of COVID-19 and the lockdown that has paralyzed economies, leading to severe recession. Governments and banks do have roles to play but cannot be expected to shoulder the entire burden of supporting especially affected businesses. How can capital markets contribute to navigating what is guaranteed to be a bumpy road back to “normal”
Interbank offered rates, the interest rates at which banks lend and borrow in the interbank market, are being replaced by risk-free rates, partly due to past rate-rigging scandals. In Europe, what is in itself a tricky conversion has been made even more complicated by the implementation of the wider EU Benchmark Regulation. Market participants must not delay in preparing to meet the transitional challenges as the deadline draws nearer.
The European Commission’s Capital Markets Union Action Plan, introduced three years ago, is intended to make capital more readily available to businesses and encourage economic and job growth within the EU. Substantial strides have been made, yet there is much more to do, especially as subsequent events such as Brexit have altered the landscape. How far has the CMU Action Plan progressed to date, and how much farther has it still to go?
Although the fine details have yet to be ironed out, there is no doubt that Brexit will have significant and long-lasting effects on financial-services institutions and businesses in the UK and the EU27. A hard-Brexit is the most jarring scenario, so what are the likely costs of a hard landing after all the negotiations are completed and the dust settles?