From Knowledge@Wharton, Opinion Piece, "Europe’s Financial Reforms: What Are the Next Big Changes?" by Kalin Anev Janse, secretary general and member of the management board of the European Stability Mechanism:
Big Topic 2: The World Is About to Change for Market Players – Capital Markets Union
While the banking union is advancing at rapid speed, Europe also launched another big project last year: the capital markets union (CMU). The CMU’s goal is to create deeper and more integrated capital markets. Traditionally, Europe has been dominated by bank financing: When an entrepreneur needed funding, banks were the go-to partner. During the crisis, banks tried to reduce their risk exposure and, as a result, financing for entrepreneurs, small- and medium-sized enterprises (SMEs) and some corporations dried up. The CMU aims to address this issue.
The differences on the two sides of the Atlantic Ocean are large. Banking union bank assets
total $33.2 trillion compared to just $13.4 trillion in the U.S. (figure 2), a gap explained by the source of financing (figure 3). Euro area banking credit reaches some 170% of GDP, but in the U.S., just 45% of GDP. Stock market capitalization and debt securities are respectively some 45% and 10% of GDP in the euro area and 110% and 45% in the U.S.