German Chancellor Olaf Scholz (SPD) wants to make Capital Markets Union and Banking Union a political issue of the „highest priority". „I am convinced that the main difference for the growth prospects of the USA and Europe lies in the lack of a Capital Markets Union and the lack of a Banking Union,“ Scholz said at the Banking Congress 2024 hosted in Berlin by the Association of German Banks. "The banks and international financial investors are ready, but are too often prevented from doing so because the capital markets in Europe are organised at the national level,“ the Chancellor stated. The further development of Banking Union and CMU must shift away from specialist committees and onto the political agenda.

The banking industry welcomed Scholz's clear positioning. The President of the Association of German Banks (BdB), Christian Sewing, referred to the importance of deep capital markets for financing the economic transformation. In order to achieve climate neutrality, annual investments of 600 billion euros are needed. „Without Capital Markets Union, the Green Deal is dead,“ the Deutsche Bank CEO warned. Manfred Knof, Chairman of the Board of Managing Directors at Commerzbank, added that the political significance that CMU has now taken on should not now be squandered by technocrats and working groups. Political leadership is needed.

If it is does not prove possible to develop the size of the European capital market to its full potential, this will mean foregoing growth, Scholz stated. No state investment or innovation fund can replace it. The state can help, but it cannot replace private capital.

Sewing is critical of the fact that Europe is currently not only an exporter of goods, but also of capital. What is needed is a single market, and not fragmentation into 27 markets. CMU can clearly be a step towards growth for Europe. But banks need to explain this better. In this context, Sewing expressly called for a strengthening of the securitisation market, with some small steps needing to be taken this year. Securitisation is „a bridging technology“ on the way to a deep Capital Markets Union, he said.

The Chancellor's words fell on receptive ears. Specifically, Scholz referred to making progress with the harmonisation of capital markets supervision. Not everything has to be brought together in one place, but there needs to be some bundling. He also said that he securitisation market for financing the real economy should be strengthened. And retail investors should be given access to a wider range of financial products. Germany is also pushing for common tax standards, and the harmonisation of insolvency law within the EU.

Scholz also pointed to the need to soon take some small steps towards CMU. a capital market unionHe also relies on a certain flexibility and ability to compromise on the part of the EU countries. This will mean compromising on national regulations for the benefit of harmonisation: There might well be 27 examples of the best insolvency law in the world, but it would be better to arrive at second-best but uniform insolvency law.

Scholz also wants to press ahead with the completion of the Banking Union. This is more than just a common safety net, he emphasised, noting the standardised rules on supervision and resolution put in place following the financial crisis. In addition „we need a common market for banking services.“ The German government's agenda includes the opening that has long been demanded by internationally active banks. Cross-border institutions must have full flexibility to deploy their capital and liquidity within the Banking Union.

The banking industry can count on the support of the German government when it comes to revising the excessive reporting obligations in the EU. Commission President Ursula von der Leyen wants to reduce them by 25%. Scholz promised to ensure that the finance industry benefits from this reduction in bureaucracy introduced by the EU Commission. Regulation has exceeded its goals in some areas. In Berlin's view, the financial market regulations in the EU should be reviewed and simplified. „There is a lot to be done, particularly with regard to reporting and disclosure obligations,“ Scholz stated.

In this context, Sewing emphasized that there must be an end to „the Silicon Valley of regulation“. Excessive bureaucracy affects not only the financial sector, but all industries. A change of mentality in regulation is needed. And a new risk culture in is needed in Germany. Such a culture would also lead to more innovative capability.