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Last week, the European Commission published its Savings and Investment Union (SIU) strategy, the new wrapper for its capital markets and banking union ambitions, rightly highlighting the need for an integrated and efficient financial services sector to deliver a broad range of the Union’s key policy and societal objectives. The challenges are unchanged from those set out in various earlier reports (going back as far as the 2001/2003 Giovannini reports on barriers to cross-border securities clearing and settlement). However, the macroeconomic, fiscal and geopolitical context has changed dramatically, and the cumulative political impact of these changes is what the Commission is literally banking on to make the difference this time. They have strong buy-in at the political level from Heads of State and Government (HoSG) in their Council Conclusions of 20 March 2025, but converting this into progress and momentum is very much the next challenging task at hand – with the question being whether it suffices to drive momentum and attract international investment to the EU, especially in a macroeconomic context of global instability, low EU growth, high public debt, and U.S. interest rates being 2% higher than those in the EU.
This SIU layer is potentially helpful to the capital markets reform cause in the EU, with its very visible and simple focus on moving trillions of euros saved in bank deposit accounts into more productive financial instruments. It also became very evident with the rapid rise of the neo-brokers since the pandemic that platforms and related technologies (including AI) can play a huge role in bringing new retail investors into financial markets. This increased engagement would have the double impact of improving returns for citizens but also providing a potentially huge injection of capital into European markets – which would still need to be better integrated and more efficient in order to put this capital to better use.
Delivering this Savings and Investment Union strategy, of course, runs into the same obstacles and market fragmentation that have historically acted as a brake on CMU ambitions. The modest ambition of this communication attests to the enduring and deep-seated barriers to change rooted in political populism, legal competencies, and cultural attitudes across the EU member states.
Recognising this, the Commission has set out in the Savings and Investment Union strategy a pragmatic and carefully calibrated approach based on a full and active partnership role for the Member States, who continue to view markets and their regulation as regional (rather than continental) and hold the vital policy competences of taxation, company law and pensions.
The appeal to Member States this time around is linked to the considerable fiscal and geopolitical pressures that many of them are feeling with respect to the necessary investments in green, digital and defence transformations. In this respect, there is a strong consensus that more financing is badly needed – and every increase in private sector investment can reduce the amount of public financing that will otherwise be needed. There is as yet, however, no such quantifiable pressure on the market's reform side in terms of assessment of the macroeconomic and microeconomic benefits that more integrated markets could deliver.
The strategy set out by the Commission is rightly focussed on a few big-ticket items, starting with increasing retail participation and leading into actions on issues around investments and financing, followed by measures to increase the integration and scale of EU capital markets. Commitments include a mix of guiding principles to increase harmonised rules and products across the bloc, including a reliance on regulations instead of directives; savings and investment products at EU level to give retail investors access instruments issued by the Commission, EIB, ESM, etc – as well as ensuring the broader deployment of key technologies including DLT, tokenisation and AI to improve the interoperability, interconnectedness and efficiency of trading and post-trading infrastructure.
Alongside this high-level ambition, the strategy calls for a raft of legislative and non-legislative initiatives by the end of 2025, including on the promotion of equity investments, market infrastructure regulations, pension reforms, more integrated supervision and easing the cross-border provisions of funds and services by asset managers. There is also a commitment to provide a 28th regime on certain issues. Further proposals are scheduled for 2026, with a ‘mid-term review’ by Q2 2027.
Delivering all of this will require further, more granular political steers from HoSG and finance ministers, including creating more immediate deadlines and pressure for action that can reach down into the technical level. It will also require the mobilisation of some industry support, which has remained muted following various false starts on these issues. The arrival of a new German government led by Friedrich Merz in late April/ early May could help generate some momentum, given how well Merz knows both Brussels (he is a former MEP), financial regulation, and the industry (previously led Blackrock’s expansion in the German market). He has already agreed on the importance of SIU in his first meetings as Chancellor-designate with French President Emmanuel Macron in Paris on 26 February. Trump’s return may also help drive progress as strategic autonomy concerns about over-reliance on US markets loom larger than those relating to London.
Progress will also require the Commission to push forward the partnership role of Member States, including with detailed macroeconomic analysis and support to engage those countries who remain culturally and operationally distant from existing European markets. They may also need to draw some firmer lines in the sand with the co-legislators – as they are currently trying to do with their simplification efforts and threat to withdraw the Retail Investment Strategy (RIS) proposal if it cannot be improved upon. In terms of setting some parameters/ a new tone and ambition for interinstitutional negotiations on financial sector regulation, such a move might just be a step in the right direction.
This blog was written by Flint Senior Advisor David Wright, Partner Fiona Wright, and Director Tomasz Krawczyk. Fiona is based in Brussels and advises clients on EU political, policy and regulatory issues, including financial services, ESG, and climate policy. Tomasz advises clients on political and regulatory developments in financial services, fintech and taxation. For more information, contact us.