By, Director-General in DG FISMA (Directorate-General for Financial Stability, Financial Services and Capital Markets Union), European Commission

In an era marked by economic and geopolitical challenges, alongside climate change and rapid technological change, the European Union (EU) stands at a critical juncture and must prepare to assume. The need to secure economic resilience, strengthen competitiveness and meet the associated ambitious investment needs has never been more urgent.

The EU has the means to secure its economic future. In particular, the union benefits from a talented workforce, innovative companies and a depth of private capital that remains to be unlocked. With approximately EUR 10 trillion of household savings held in deposit accounts, if even a small proportion of those funds were made available for direct investment, the current EU funding gap for innovation would be significantly smaller. In essence, there is a critical mismatch within the EU between the large pool of savings on the one hand and the significant investment needs of innovative companies on the other.

Despite some progress, our capital markets are still fragmented. And this is bad for everyone: Citizens do not have enough opportunities to invest and earn good returns on their savings; businesses do not have an easy way to tap into European financing, including equity; and financial operators that wish to invest and scale up across Europe face significant barriers and costs.

This savings-and-investments mismatch requires immediate attention and a bold and coordinated response. The Savings and Investments Union (SIU) strategy, adopted by the European Commission (EC) on March 19, is a crucial part of this response.

The SIU aims to create a better pathway for private capital to flow into European companies, fostering investment and growth, as well as greater returns for savers, benefitting the entire economy. This means creating a more integrated and efficient EU-wide capital market. A single market for capital will ultimately help finance the EU’s strategic priorities, including those related to the digital and green transitions, as well as security and defence.

The SIU strategy provides a clear roadmap for achieving these goals, outlining initiatives designed to give citizens more opportunities to invest and facilitate access to finance for companies, particularly in equity markets. It aims to remove existing barriers to a single European capital market and further harmonise how financial markets are supervised. The strategy also includes actions to boost the integration and competitiveness of the EU banking sector, such as deepening the banking union, the EU’s flagship project for integrating the banking sectors among euro area Member States. This reflects the essential symbiosis between integrated banking and capital markets.

We will take significant steps under the SIU to make investing in the EU easier for our citizens. We also want to make sure that investors see the value of putting their money to work in the real economy. Savings and investment accounts have proven to be an effective way for citizens to invest easily in many of our Member States, and we want to see this success extended throughout the EU. Through the SIU, we are putting together an EU blueprint for savings and investment accounts for retail investors, drawing on existing national best practices—for example, in countries such as Sweden. This will include recommendations for the tax treatments of these accounts. We also want citizens to clearly make informed investment decisions. To help with this, we will present a financial-literacy strategy to empower citizens and boost their participation in capital markets.

Auto-enrolment in occupational pensions is another area in which certain Member States have seen success in giving greater returns to pension holders. We will build on best practices at the national level and will propose recommendations to promote such auto-enrolment schemes. Additionally, we will review the regulation of the pan-European Personal Pension Product (PEPP) to boost its effectiveness and appeal.

Through the SIU, we want to make it easier for EU companies to access finance—namely, equity. Companies in Europe mainly rely on bank financing, but many companies that are just starting out are not able to secure financing from banks, so they need to turn to equity markets to support their expansions. This is an area in which we can do better in the EU. We are working to make it easier for companies, including innovative and fast-growing ones, to obtain the necessary financing. We want to create an EU investment ecosystem within which companies do not need to think twice about securing financing and are able to focus on their core businesses. We are also looking at freeing up resources to draw more investments from traditional lenders, including through securitisation and prudential requirements for banks and insurers. Moreover, the Commission will seek ways to better align EU public-funding instruments with the SIU’s objectives, including by considering how to further develop successful EU and national programmes supporting the development of venture and growth capital.

Ensuring our markets function efficiently is critically important. European firms frequently miss opportunities to enjoy the scale and synergies of a single market, placing the EU at a competitive disadvantage. We are working to identify and systematically remove the barriers to our single market for savings and investments. This may take the form of legislation where needed, including to remove barriers to the cross-border operations of market infrastructures, asset management and fund distribution. This will enable financial-market participants to transact efficiently across the EU and reduce financial-services costs for businesses and citizens.

Strong supervision is crucial for ensuring the strength, stability and integrity of EU capital markets. If we want to remove barriers to market integration, we also need to have more convergent supervision across the 27 Member States. If you are an operator within the EU, you must receive the same supervisory treatment for the same activity and product as other operators, irrespective of your geographical location.

Today, this is not the case, and this is a major cost of doing business. Under the SIU, we want to make supervision more efficient and harmonised by strengthening existing tools for convergence and potentially through transferring certain supervisory responsibilities from national to EU-level supervision.

The scale of the industrial transformation that is needed in the coming decades requires a more diverse financial system that includes both capital markets and banking. By recognising the interconnections between our capital market and our banking sector, we can promote the growth of our financial sector, increase efficiency and reduce risks. Advancing the integration of banking markets as well as that of capital markets across the union is, therefore, mutually reinforcing.

Banks have a key role in providing citizens and businesses across Europe with better and cheaper financial products and services. Banks retain strong local relationships and knowledge, as they tend to build long-term relationships with their clients, companies and depositors. Banks are also enablers of capital markets, as they make capital markets deeper and more liquid by acting as issuers of securities, intermediaries for insurance and intermediaries for institutional, corporate and retail investors—and, in some cases, they are investors and liquidity providers themselves.

To align with the scale of the EU economy, we need large pan-European banks that are not restricted to national markets. Banks should see the opportunity in a single market, and we would encourage them to make the most of it. In this respect, completing the banking union will be crucial to maintaining financial stability and better integration of the banking sector.

In essence, the Savings and Investments Union aims to create a more competitive and resilient EU economy, empowering citizens and fostering growth across the region. As the SIU builds on work done over the past 10 years, the current geopolitical reality makes it more urgent and necessary than ever. We need a coordinated effort from all stakeholders, including policymakers, regulators, financial institutions and market participants. Member States have clearly backed the SIU, and we have the political momentum to make it happen. The next step is to translate political declarations into decisive actions, and we need to see that from all parties involved—especially from Member States.

In conclusion, the next few years will be critical in determining the trajectory of our European economic growth, innovation and competitiveness. Building the Savings and Investments Union represents a significant step forward in strengthening the EU’s ability to stand on its own two feet and achieve its strategic objectives.