EU: Call for Evidence for European Savings and Investments Union

 

The European Commission has launched a call for evidence regarding the planned European Savings and Investments Union.

In her 2024-2029 Political Guidelines, President von der Leyen announced plans to propose a European Savings and Investments Union (SIU), bringing together the Capital Markets Union (CMU) and the Banking Union (BU) to build on their achievements. With two CMU action plans (2015, 2020) and significant progress in the BU since 2012, many of the essential building blocks for the SIU are already in place or under development.

In her mission letter, President von der Leyen tasked Commissioner Albuquerque with leading the development of the SIU, aimed at leveraging private savings to support Europe’s broader economic objectives. This initiative will focus on:

• Helping citizens save more efficiently;
• Unlocking capital for innovation;
• Advancing digital finance;
• Ensuring the competitiveness of the financial sector; and
• Harnessing sustainable finance.

Commissioner Albuquerque has committed to presenting a strategic roadmap for the SIU in the early months of her mandate, outlining how the EU, Member States, and market participants can advance decisively on this initiative. The European Commission plans to issue a Communication on the SIU, reflecting the growing support for the initiative, including endorsements in reports by Enrico Letta and Mario Draghi.

Political and Market Support for the SIU

The SIU enjoys renewed political momentum, as reflected in the March 2024 Eurogroup Statement and the April 2024 European Council Conclusions on the future of the CMU. However, Member States have yet to reach a consensus on the key measures needed to accelerate its implementation. The European Parliament has consistently supported the completion of both the BU and CMU, recognizing their role in achieving the EU’s strategic economic goals.

Reports by Mario Draghi and Enrico Letta have highlighted inefficiencies in EU capital markets, particularly a mismatch between savings and investment needs. While European households hold significant wealth, much of it is locked in low-yielding deposits, limiting its potential to finance high-growth and innovative companies. In Q2 2023, EU households saved 14.79% of their disposable income, and by the end of the year, they held €11.63 trillion (31.01%) of their wealth in currency and deposits, missing out on better returns available in capital markets.

At the same time, the EU faces increasing capital needs to finance competitiveness, innovation, and strategic investments in areas such as the green and digital transitions, defence, and industrial strategy. The banking sector, while remaining a major source of financing (50.43% of corporate funding in 2023), is not well-suited to all investment needs, particularly for young, high-growth, and innovative firms that require equity rather than debt. These companies often struggle to find adequate financing within the EU.

Despite progress, EU capital markets lack the necessary scale, depth, and cross-border integration, with persistent barriers to seamless financial flows. This reinforces the need to further develop and integrate EU capital markets, particularly in providing risk capital.

Objectives of the SIU

The SIU aims to support Europe’s broader economic and social priorities, ensuring long-term sustainability, competitiveness, and prosperity. By bridging the gap between savings and investments, the SIU seeks to:

• Increase wealth creation for citizens by improving access to investment opportunities, particularly for long-term savings and retirement planning.
• Strengthen business financing by expanding investment options, ensuring that capital is effectively allocated to productive and strategic sectors.
• Enhance financial market integration, removing barriers to cross-border investment to create larger, more efficient capital markets.

Key Actions Under the SIU

The SIU will be a long-term project, structured as a series of actions to expand and integrate European capital and banking markets. Building on the CMU and BU, it aims to create a tipping point for accelerated financial market development. Key areas of action include:

1. Mobilizing Private Savings More Effectively

   • Encouraging retail participation in capital markets through simple, low-cost investment products.
   • Exploring fiscal incentives to promote investment and increase capital formation.

2. Expanding Investment Opportunities for Businesses

   • Facilitating access to finance, especially for young and innovative firms.
   • Incentivizing European private and institutional investors to support productive, high-growth sectors.

3. Improving Market Integration and Efficiency

   • Identifying and removing barriers to cross-border financial activity, including supervisory, taxation, and authorization obstacles.
   • Strengthening regulatory harmonization to support a more unified European financial market.

4. Enhancing Supervisory Frameworks

   • Ensuring that capital market regulations are consistently applied across the EU.
   • Strengthening oversight mechanisms to maintain high regulatory standards.

Guiding Principles for Implementation

The Commission will follow these principles in developing the SIU:

• Balancing legislative and non-legislative actions, ensuring that regulatory changes focus on key areas while minimizing administrative burdens.
• Prioritizing EU-level action where it is most effective, while coordinating with Member States on national-level initiatives.
• Putting citizens at the center of the SIU, ensuring they benefit from greater investment opportunities.
• Aligning with broader EU policy goals, such as the Clean Industrial Deal, the European Competitiveness Fund, the Single Market Strategy, and the Startups & Scaleups Strategy.

Conclusion

The Savings and Investments Union (SIU) represents a transformative initiative aimed at harnessing Europe’s private wealth to fuel innovation, competitiveness, and sustainable growth. By creating deeper and more integrated capital markets, the SIU will help businesses access financing, enhance citizen wealth, and drive the EU’s long-term economic ambitions.