The European Fund and Asset Management Association said a single market for personal pensions across the European Union will also play an important role in broadening capital markets the region.

Peter De Proft, director general of EFAMA, said in a statement: “Our proposal is to create a new type of pension product that could be offered to EU citizens in addition to the pension products currently available at national level”.

EFAMA, which represents about €17 trillion in assets, welcomed the European Union Commission’s consultation paper today on a capital markets union across all 28 member states. The project has been launched as the EU’s stock markets, equity markets and venture capital markets are less developed than comparable economies.

“US public stock markets are almost double in size (stock market capitalisation is 138% of GDP in the US vs. 64.5% in the EU in 2013),” said the paper. “Relative to the size of the economy, stock market capitalisation in China exceeds that of the EU.”

The U.S. private placement market and the U.S. corporate debt securities markets are also almost three times bigger than in the EU according to the paper. In the U.S. banks provide only 20% of business finance compared to 70% in Europe.

The Investment Association, which represents UK fund managers, said the EU should follow the logic of the Ucits legislation which allows funds to be sold to any investor in the region under a harmonised regulatory regime.

Richard Metcalfe, Director of Regulatory Affairs at The Investment Association, said in a statement: “That may require imagination, exploring how digital options could improve product availability and support investor decision-making. It certainly needs a consistent approach to investor protection, which does not currently operate to the same high standard for all investment products.”

Short-term measures being reviewed by the Commission include the implementation of the European Long-term Investment Funds regulation for infrastructure financing, securitisation, standardised credit information on SMEs, private placements and reviewing the Prospectus Directive.

Metcalfe said: “The Investment Association intends to put forward proposals regarding the efficiency of the prospectus process as well as the role, and form, of private placements and securitisation. These will be important in ensuring that systemically benign finance can complement existing funding channels.”

In the medium to long-term, the paper is looking at how to reduce the costs of setting up and marketing investment funds across the EU; whether targeted measures in the areas of company insolvency, securities laws and taxation could materially contribute to CMU; the treatment of covered bonds and how to further develop venture capital and private equity financing.

The paper said: “If European venture capital markets were as developed as those in the US, an additional €90bn of funds would have been available to finance companies between 2008 and 2013; and more than 4,000 additional venture capital-backed deals could have been struck.”

Dörte Höppner, chief executive at European Private Equity and Venture Capital Association, said in a blog that the EVCA strongly welcomed the capital markets initiative.

She said that between 2007 and 2013, European private equity and venture capital invested €307bn in 25,000 companies who employ more than 8 million people, but the EU needs to free up the enormous pool of capital with institutional investors by enabling it to flow across borders.

Höppner noted some financial legislation that is preventing institutions from investing. “It is essential that Solvency II for insurers, the IORPD proposal for pension funds and CRD IV for banks, make a proper assessment of the capital requirements for investing in private equity and venture capital, based on independent academic research with a rigorous evidence-base,” she added.

The EU also needs to remove barriers that discourage EU fund managers from raising funds in other member states. “It’s therefore legitimate to ask whether AIFMD, for example, due for review in 2017, got the balance right when imposing new requirements that were designed to protect institutional investors but which inevitably lead to higher costs and lower returns,” said Höppner.

The BBA, the rade association for the UK banking, said the initiative is extremely important for the EU’s attempts to kick-start growth in Europe. However it also warned that the introduction of a financial transactions tax would work against these aims.

Sally Scutt, deputy chief executive of the BBA, said in a statement: “Introducing a financial transactions tax or restricting banks’ ability to conduct market making activities for their clients through further structural reform could undermine attempts to inject greater liquidity into capital markets.”

EFAMA said: “One possible hurdle for the CMU is the proposed FTT, which has the potential to cause distortions, thus endangering the EU single market and jeopardising long-term savings, growth and investment.”

The EU Commission is asking for feedback from the European Parliament and the Council, other EU institutions, national parliaments, businesses and the financial sector by 13 May 2015. The Commission will then adopt an action plan this summer setting out its roadmap and timeline for putting in place the building blocks of a capital markets union by 2019.

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