Europe pushes for unified capital markets and stronger banking union
Proposed reforms include a single capital markets rulebook, stronger EU supervision and completion of a European deposit insurance scheme.
European Central Bank Vice-President Luis de Guindos has called for deeper financial integration in Europe, arguing that more unified capital markets and a stronger banking union are needed to support growth, resilience and competitiveness.
Speaking at a joint European Commission and ECB conference on financial integration, de Guindos said Europe has made progress in integrating financial markets, including through stronger cross-border capital flows and reduced differences in some asset prices across member states. However, he warned that fragmentation persists in areas such as corporate lending, equity markets and foreign direct investment.
Cross-border corporate lending within the euro area accounts for only 14% of total corporate lending, while equity market integration has shown signs of decline since 2022, and foreign direct investment within the euro area has fallen to a historical low, according to the speech.
De Guindos said policy priorities should include a genuine single rulebook for capital markets, a more European supervisory framework and support for a tokenised financial ecosystem through the distributed ledger technology pilot regime. He argued that these measures would reduce legal uncertainty, support digital financial innovation and help remove barriers to cross-border capital market integration.
He also called for further banking union reforms, including treating the banking union as a single European jurisdiction, finalising a European deposit insurance scheme and allowing capital and liquidity to move more freely within cross-border banking groups. Such steps, he said, would help reduce fragmentation and strengthen the euro area’s financial system.
The speech also pointed to the need for a more coherent regulatory framework, including simpler and more harmonised rules for banks, closer attention to regulatory gaps between banks and non-bank financial institutions, and the removal of legal and tax barriers that still limit cross-border activity.
Why does it matter?
Financial fragmentation affects how efficiently Europe can channel savings into investment, support innovation and absorb economic shocks. Deeper capital markets make it easier for businesses to access funding across borders, while a stronger banking union could reduce national barriers and improve resilience during periods of stress.
The speech also connects financial integration with digital finance and strategic autonomy. By linking capital market reform with tokenisation, EU-level supervision and banking union, the ECB is framing financial integration as part of Europe’s broader effort to remain competitive in a more fragmented global economy.
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