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Europe’s funds industry body has thrown its weight behind a French proposal for a small group of countries to forge ahead with a capital markets union, in a sign that investors are growing increasingly frustrated with the EU’s lack of progress on the long-standing ambition.
Sandro Pierri, president of the European Fund and Asset Management Association, which represents the region’s €28.5tn investment management sector, told the Financial Times that further delays and disagreement on reform increased the risk of losing even more companies and investment to the US, and that policymakers needed to act now.
“If it doesn’t work, it’s better to have four, five, six . . . a good number of countries which are creating an alignment around this priority,” said Pierri, who is also chief executive of BNP Paribas Asset Management.
“The risk is that we’re going to be stalling in a situation which is going to be characterised by endless debate about what needs to be done, giving ever-increasing advantages to other places like the US to capture part of the savings that Europe has generated,” he added.
Large countries such as France, Italy and Spain are pushing a plan to unify the bloc’s fragmented capital markets — an ambition outlined a decade ago — as a way of reviving the region’s crisis-hit markets and countering the threat of further capital heading abroad. Trading volumes have tumbled and the region has struggled to attract and retain initial public offerings.
But the proposals, which proponents hope would make it easier for companies to list and for investors to back them, ran into opposition from a majority of member states this month, with many smaller countries wary of handing more control and regulatory powers to Brussels.
In February, French finance minister Bruno Le Maire proposed that just three or four countries could forge ahead by themselves with a union, which could operate on a voluntary basis. “I am fed up with discussions. I am fed up with empty statements,” he said at the time.
Last week, French President Emmanuel Macron warned that Europe faces a “mortal” threat from economic decline.
Pierri warned that delays to reform risked blocking much-needed avenues of financing, with issues such as the green transition and the need for greater defence spending among the challenges facing the bloc.
“We are at a pretty important crossroads when it comes to the future of Europe. We have the green transition, digital transition, we have a demographic transition . . . [and the] impact of a geopolitical transition . . . All these challenges basically require financing,” he said. “The moment to act is now.”
Pierri highlighted how “most of the money” in European households’ savings was “not properly mobilised”, with 41 per cent of savings held in deposits and 10.5 per cent in investment funds in 2022, according to Efama research.
Policymakers should simplify disclosures for retail investors, improve the quality of financial advice, promote the use of tax incentives to encourage funnelling money into pension funds and auto-enrol individuals into pension schemes, he said.
“Tax incentives in long-term savings works, the example of 401k plans is quite staggering vis-à-vis what we have in Europe,” he added, referring to US pension plans.
He also suggested that policymakers consider “potential reform” in order to create a vibrant European asset management industry to rival large fund managers in the US.
“We need a proper ecosystem to work in Europe right now, which requires strong asset managers. We are a key component in this mobilisation of capital,” he said.
