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Capital Markets and Capital Markets Union

The Capital Markets Union (CMU) initiative is designed to establish a unified market for capital within the European Union. The objective is to facilitate the movement of funds – including investments and savings – across the EU, benefiting consumers, investors, and businesses, irrespective of their geographical location.

The primary goals of a capital markets union are:
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  • Enhancing funding options for businesses while reducing costs, particularly for small and medium-sized enterprises (SMEs), ensuring they have access to necessary financing.
  • Contributing to economic recovery following the Covid-19 pandemic and generating employment opportunities.
  • Presenting new avenues for investors and savers.
  • Cultivating a more inclusive and resilient economy.
  • Aligning with Europe's Green Deal and digital agenda, fostering sustainability and technological advancement.
  • Strengthening the EU's global competitiveness and self-sufficiency.
  • Bolstering the financial system's resilience to effectively adapt to the UK's departure from the EU.
The endeavor to establish a comprehensive single capital market commenced over six decades ago with the Treaty of Rome, gaining momentum through the inclusion of capital movement freedom in the 1992 Maastricht Treaty and the financial service action plan in 1999. However, this goal remains unrealized.

The Creation of a European Capital Market


The CMU initiative was initiated by the Juncker Commission, which introduced the inaugural CMU action plan in September 2015. This plan outlines a series of more than 30 measures aimed at laying the foundation for a unified capital market within the EU. 

​While progress has been made since the CMU initiative was launched in 2015, EU capital markets remain fragmented. The Commission therefore adopted on 24 September 2020 a new CMU action plan.

The plan set out 16 legislative and non-legislative measures to deliver on three main objectives:

  • support a green, inclusive and resilient economic recovery
  • make the EU an even safer place to save and invest long-term
  • integrate national capital markets into a genuine single market


Some of them are already the subject of completed legislative acts, others are still under discussion, and others are already undergoing revision.

Action Plan

The CMU action plan has 16 legislative and non-legislative actions to deliver on three key objectives.

When reading the legislative texts listed below, always consult the most recent versions as indicated by Eurlex.

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A. Support a green, digital, inclusive, and resilient economic recovery by making financing more accessible to European companies (including SMEs)

  1. Action 1 - Making companies more visible to cross-border investors
    • Prospectus Regulation (EU) 2017/1129: Simplifies the process for companies to raise capital, particularly across borders.
    • Regulation (EU) 2023/2859: This regulation strengthens the protection of investments within the EU, facilitating cross-border investments and contributing to a more integrated single market.
  2. Action 2 - Supporting access to public markets
  3. Action 3 - Supporting vehicles for long-term investment
  4. Action 4 - Encouraging more long-term and equity financing from institutional investors
  5. Action 5 - Directing SMEs to alternative providers of funding
  6. Action 6 - Helping banks to lend more to the real economy
B. Make the EU an even safer place for individuals to save and invest long-term

  1. Action 7 - Empowering citizens through financial literacy
    • No direct legislation, but the CMU Action Plan includes initiatives aimed at improving financial literacy across the EU.
  2. Action 8 - Building retail investors' trust in capital markets
  3. Action 9 - Supporting people in their retirement
C. Integrate national capital markets into a genuine single market

  1. Action 10 - Alleviating the tax-associated burden in cross-border investment
    • No direct legislation: The CMU Action Plan includes ongoing efforts to address tax barriers to cross-border investment.
  2. Action 11 - Making the outcome of cross-border investment more predictable as regards insolvency proceedings
    • Cross-Border Insolvency Framework: Efforts are ongoing to harmonize insolvency rules across the EU.
  3. Action 12 - Facilitating shareholder engagement
  4. Action 13 - Developing cross-border settlement services
  5. Action 14 - Consolidated tape
  6. Action 15 - Investment protection and facilitation
    • Investment Protection Agreements: Ongoing efforts to enhance the protection of EU investments in third countries.
  7. Action 16 - Supervision

Company reporting

Company reporting is a critical component of the regulatory framework within the EU, aimed at ensuring transparency, accountability, and trust in the financial markets. Companies operating in the EU are required to disclose various types of information about their finances, operations, and impacts on society and the environment.

Key Aspects of Company Reporting

  1. Financial Reporting:
    • Purpose: EU rules mandate that companies provide accurate and comprehensive financial information. This ensures that investors, regulators, and other stakeholders have a clear understanding of a company’s financial health.
    • Importance: Financial transparency is essential for making informed investment decisions and maintaining market integrity, which are crucial for the success of the Capital Markets Union (CMU).
  2. Corporate Sustainability Reporting:
    • Purpose: Large companies and publicly listed companies in the EU must regularly report on social and environmental risks, as well as the impact of their activities on people and the environment.
    • Importance: Sustainability reporting is vital for promoting responsible business practices and aligning corporate activities with broader societal goals. It also enables investors to assess the long-term sustainability of their investments, fostering confidence in the capital markets.
  3. Transparency Requirements for Listed Companies:
    • Purpose: Issuers of securities on regulated markets are required to disclose key information to ensure transparency for investors. This includes periodic financial reports and information on significant events that might affect a company's valuation.
    • Importance: Transparency requirements help protect investors and ensure that they have access to the necessary information to make informed decisions, thereby supporting the smooth functioning of the capital markets.
  4. Public Country-by-Country Reporting:
    • Purpose: Companies in the extractive and logging industries must report on their payments to governments. The EU also promotes tax transparency to ensure that companies pay their fair share of taxes.
    • Importance: This reporting fosters greater accountability and transparency in how companies interact with governments, contributing to the fight against corruption and promoting fair taxation, which are key to building trust in the markets.


Why Company Reporting is Essential for the Capital Markets Union (CMU)

Company reporting underpins the integrity and efficiency of the Capital Markets Union by ensuring that all market participants have access to reliable and comparable information.
This transparency:

  • Enhances Investor Confidence: Accurate and timely reporting allows investors to make well-informed decisions, which is crucial for the smooth operation of the capital markets.
  • Supports Market Integration: Consistent reporting standards across the EU facilitate cross-border investment and market integration, key objectives of the CMU.
  • Promotes Accountability and Sustainability: By requiring companies to disclose financial and non-financial information, the EU fosters responsible business practices that align with long-term economic and social goals.

Company reporting is a cornerstone of the CMU, as it builds the trust and transparency necessary for a unified and efficient capital market across the EU.

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Auditing of Companies' Financial Statements in the EU

The EU has established regulations on statutory auditing to enhance the integrity and reliability of financial statements. A statutory audit is a legally mandated review of a company's financial records, providing an independent opinion on the accuracy of these financial statements. This process is essential for maintaining stakeholder confidence, particularly among investors and shareholders, by ensuring that companies' accounts are trustworthy and transparent.

Key Objectives of EU Statutory Auditing Regulation

  1. Improving Independence: The EU aims to strengthen the independence of statutory audit firms and auditors from the entities they audit, reducing conflicts of interest and enhancing the credibility of the audit process.
  2. Enhancing Informational Value: By improving audit reporting, the EU seeks to provide investors with more valuable and reliable information, supporting better investment decisions.
  3. Facilitating Cross-Border Audit Services: The regulations are designed to help the cross-border provision of statutory audit services within the EU, promoting a more integrated and efficient audit market across member states.
  4. Fostering a Dynamic Audit Market: The EU encourages a more competitive and dynamic audit market, ensuring that statutory audit services are of high quality and widely accessible.
  5. Enhancing Audit Supervision: Strengthening the supervision of statutory audits ensures that audit practices are consistently high across the EU, further safeguarding the integrity of financial statements.
  6. Cooperation with Non-EU Countries: The EU promotes convergence and cooperation with audit authorities in non-EU countries to ensure that audit standards are upheld internationally, benefiting global stakeholders.

Importance of Statutory Auditing for the EU Market

Statutory audits are crucial for the orderly functioning of financial markets as they enhance the confidence of investors and other stakeholders in the accuracy of companies' financial statements. By ensuring transparency and reliability in financial reporting, statutory audits help maintain the integrity of the financial markets, support investment, and contribute to overall market stability.
The EU's ongoing efforts, including cooperation between national audit authorities, market monitoring, and relations with third countries, are all aimed at maintaining a robust and trustworthy audit environment within the EU and beyond.