On Wednesday 11 November 2020, the European Court of Auditors (ECA) will publish a special report on the Commission’s efforts to achieve the challenging goal of building a capital markets union (CMU).
ABOUT THE AUDIT
The free movement of capital is a key long-standing objective of the European Union. It is one of the pillars of the Single Market, along with the free movement of people, goods and services. To provide an alternative funding source for start-ups and small and medium-sized enterprises (SMEs) and to mobilise private capital, the Commission has been making efforts since 2015 to supplement the Banking Union with a capital markets union (CMU). The CMU is also intended to remove cross-border barriers to investment within the EU more generally.
The audit report is expected to find that despite the Commission’s efforts to achieve the challenging goal of building a CMU, the results are yet to materialise.
In the EU, businesses traditionally largely rely on banks for financing their activities. There are clear geographical discrepancies between Member States in the capitalisation, liquidity and depth of their local capital markets. Member States in the west and the north tend to have deeper capital markets and self-reinforcing capital hubs, while Member States in the east and the south lag behind.
Brexit has also accentuated the need to build more integrated capital markets in the EU, as the UK was the biggest and deepest capital market and the most important European hub of start-up finance.
The ECA’s special reports set out the results of its audits of EU policies and programmes or management topics related to specific budgetary areas. The ECA selects and designs these audit tasks to be of maximum impact by considering the risks to performance or compliance, the level of income or spending involved, forthcoming developments and political and public interest.