[ M A R K E T R E V I E W | C A P I T A L M A R K E T S U N I O N ] tion and efficiency . Eliminating competition would not be a good idea , as it would limit investor choice .” While progress has undoubtedly been slow-moving , there is a clear desire to bolster harmonisation across the posttrade landscape . Connectivity upgrades to the T2S are due to be rolled out next year , while the CSDR refit will enable the possibility of closer collaboration between CSDs . Another notable success has been the integration of Euroclear Bank as the domestic CSD in Ireland . Following Brexit , the Irish market agreed that the asset protection framework on domestic securities would be governed by Belgian law , with Euroclear Bank now serving as the CSD for Irish securities . As pointed out in Euroclear ’ s Unlocking scale and competitiveness in Europe ’ s market report , the example shows that full CSD consolidation is possible and could serve as the basis for similar efforts in other countries , but it “ requires the support of market participants and national authorities ”. The problem is that initiatives often encounter the same national barriers impacting regulatory alignment , as Pablo Portgual , senior director , public affairs at Euroclear , described at the AFME conference : “ Some countries , for national security reasons , have a big problem with outsourcing , and that effectively prevents the creation of synergies between infrastructures .”
Next steps With the political motivations seemingly in the right place , and the key areas identified to boost harmonisation , the next step is to put the plan into action – which may be easier said than done . The rising tide of nationalism in Europe is placing increased pressures on domestic governments to take more inward-looking approaches when it comes to policy . The age of globalisation is grinding to a halt , with the European collective set to suffer as a result . “ People want to have their cake and eat it ,” explained Pekin . “ They want interoperability , they want union , they want integration – but also , nobody wants to give up anything from their national sovereignty agendas . So how do you square that circle ? If you want a Capital Markets Union , you want no barriers , you want the single CSD – you may never get there in our lifetime . So , the next question becomes : what can you do in the meantime ? You can start with interoperability ; you can start with data – it ’ s a critical point .” Therein lies the challenge for the EU . Policy makers and country leaders need to try and get those wheels turning again , and instil within these local governments a belief that a more consolidated Europe would bear fruit to all participants . “ Convincing is the word , and that is our daily business ,” said Marcel Haag , director of horizontal policies at the European Commission , at the AFME event . “ We are engaging with member states and we hear them out and we exchange arguments . A lot of member states will say , ‘ our priority is to grow our national market ’ or ‘ we are on the periphery , we have an underdeveloped capital market ’. We have to engage , assess the pros and the cons , and let ’ s see how we can accommodate their
“ It ’ s a really interesting piece , which is gaining traction ,” says Pott . “ Rather than saying to member states , you have to all conform to a single system and we ’ re going to do away with the existing 27 , you say to businesses that want to adopt the 28th regime that they can move in that direction . “ It might work better in some areas than others ,” he continues . “ For taxation , it won ’ t work so well because business is still bound by its local taxation rules . But when you think about insolvency rules , for example , which was one of those intractable areas where it ' s very difficult to move beyond the national insolvency provisions that exist , having a 28th regime that firms could opt into , would be a helpful alternative and maybe overcome some of those national sensitivities of giving up or doing away with national systems .”
“ I hope the political momentum and spotlight that we have in Europe at the moment can help us provide the right context to drive change .”
PABLO PORTUGAL , SENIOR DIRECTOR , PUBLIC AFFAIRS , EUROCLEAR
concerns .” While some are eager to ensure an aligned approach across the 27 countries , others are not so patient . Talk of a breakaway coalition within the EU has picked up pace in recent months , with Spain ’ s minister for the economy , Carlos Cuerpo , outlining proposals to the Financial Times in October for a new mechanism that would allow three or more countries to proceed on joint initiatives without the inclusion of other member states . On such a project , Haag said : “ EU law allows for this under certain conditions . Of course , the Commission ’ s role is not to divide and create different leagues , but to unite and create a united Europe . Solutions that would allow a smaller group of member states to go forward faster , that for us is always the second best option .”
A ‘ 28th regime ’ A separate proposal – set out in the Draghi report – recommends the establishment of a “ 28th regime ”, whereby a special legal framework is created outside of the 27 different legal frameworks with a view to shortening the length of national procedures and integrating them into a single process .
How ever the bloc plans to move forward , it ’ s important to get the ball rolling as soon as possible . The gap between Europe and the US is only widening – a 2023 report from the European Centre for International Political Economy found that the gap between US GDP per capita and EU GDP per capita rose from 47 % in 2010 to 82 % in 2021 . Harmonised tax and investment frameworks , and a unified post-trade environment are not just a technical necessity ; they are the foundation upon which a successful Capital Markets Union can be built , enabling Europe ’ s capital markets to thrive on the global stage . “ I hope the political momentum and spotlight that we have in Europe at the moment can help us provide the right context to drive change ,” said Portugal . “ A lot depends on the market and on FMIs collaborating with their clients and with the ecosystem to deliver that call for more integration , more efficiency and cost reduction .” Yes , the project is vast and the road will be long , but the EU and the financial services industry has the opportunity to spearhead something great in Europe . It ’ s time to make it happen .
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