The European Commission has embarked on a new financial regulation project, called the Capital Markets Union (CMU). On the eve of the presentation of the CMU Action Plan, SOMO presents a discussion paper in which it questions and highlights the risks of this new European project.
“It will not stimulate investment and growth because, contrary to what the Commission claims, a lack of credit is not the most important factor that holds back business investment. Lack of demand is the pressing problem”, explains SOMO-researcher Julian Müller. “CMU also aims to channel a higher share of household savings towards capital markets – and away from bank deposits – exposing citizens, particularly pensioners, to higher financial risks.”
SOMO argues that the CMU will also increase risks for the financial and economic system in general, for example through measures to stimulate the market for loan securitisations, the kind of financial instruments that played an important role in the 2008 crisis. CMU even threatens to undermine progress on other important financial stability measures such as the financial transaction tax.