This requires designing policies to support the development of markets’ size and scope, removing barriers between EU capital markets, expanding sources of funding for companies, and broadening the role of the non-bank financial sector. Ultimately, a well-developed CMU will increase private risk-sharing, promote financial stability and boost economic growth. Starting in 2015, the European Commission launched a series of initiatives to stimulate the development and integration of EU capital markets. On market development, the Commission adopted a set of harmonised rules on securitisation and published its fintech action plan in 2018. Initiatives on market integration included the review of the European Supervisory Agencies and the covered bond legislative package. The former aimed to make our system of financial supervision more efficient and effective and also gave the European Banking Authority a coordinating role in the areas of anti-money laundering and terrorist financing. The latter should foster the development of covered bonds by creating a harmonised EU framework, providing a source of long-term financing for banks and supporting the real economy across the EU. Despite the efforts of policymakers and market participants, retail investors are far from having embraced investing in capital markets. While the full impact on the real economy may take time to materialise, it is concerning that the initial ambitions of the plan launched by the European 3/5  BIS central bankers' speeches  Commission towards the development of a CMU were significantly lowered to enable colegislators to reach an agreement.
A robust and stable financial system, that we have managed to ensure so far, is a necessary, but not sufficient condition for achieving sustainable growth. Financial system efficiency needs to be upgraded, so that it serves to lift economic efficiency, not least by harnessing the hitherto untapped strength of the grass-root economies, where the emerging organic social-economic network has increasingly highlighted the potential contribution to growth and welfare improvement. For the banking system, the strategy to harness this potential is set out in the Financial Sector Master Plan Phase 2, which is a continuation from Phase 1. BIS Review 20/2010  1  Ladies and gentlemen, The challenges I have raised, together, pose a tall order. So in today’s talk, let me set out our strategy and policy priority in three parts. First, the SWOT analysis of the banking system and the challenges we face; Second, the key strategies in the Financial Sector Master Plan Phase 2; and Third, the key measures in risk-based supervision to ensure stability. First, the strength of our banking system is evident in its continuous solid performance. During the toughest times, our banks remained strong and resilient against the backdrop of economic slowdown. Loan decelerated, partly due to contraction in corporate portfolio and deceleration in household portfolio, as a result of more cautious business undertaking and household spending, and partly due to tightened loan underwriting standard. The good news is the figures are already starting to pick up again.