The review did not result in a broad revision of the powers and mandate of the ESAs, nor in a strengthening of the European perspective in the ESAs governance. Ultimately, the growth and integration of capital markets need to be reflected in the EU’s supervisory set-up. Reaping the synergies between CMU and banking union This brings me to my last point: we should take advantage of the synergies between CMU and banking union. More efficient markets could complement banking union by offering ways to mobilise EU savings to finance young and innovative firms. Fostering equity investment by addressing the debt-equity bias would support the development of an equity culture and increase households’ return on their savings, for example. It could furthermore enhance financial stability through the reduction of leverage in the corporate system. At the same time removing barriers to the functioning of crossborder debt markets would facilitate a smooth allocation of the savings surplus across the euro area. Creating an EU playing field in terms of insolvency regimes, taxation and supervision would support both the objectives of CMU and the banking union. In fact, strong cross-border banks and cross-border ownership of assets would reduce the risk of disruptive capital flight in crisis times, while also reducing the bank-sovereign nexus. To achieve CMU and banking union, we should also look at controversial issues such as the need for a European safe asset. There is no other currency union in existence in which regional debt is considered to be the safe asset.
Addressing this gap would support the banking and capital markets by creating a homogeneous product of a high quality and significant size that could become a benchmark for investors. If designed in a way that doesn’t undermine incentives for sound national fiscal policies, a safe asset would help to mitigate the bank-sovereign nexus, reduce cross-border safe-haven flows and improve financial integration, thereby also enhancing the effectiveness of our monetary policy. And, last but not least, this would contribute to enhancing the attractiveness of European capital markets and ultimately support the international role of the euro. Promoting European responses to achieve CMU Let me conclude with two messages. First, convincing investors and companies to venture outside their borders requires certainty and homogeneity on the regulatory conditions that apply abroad. This means that the core aspects of national policies need to be further harmonised and implemented in a consistent way to support the integration of capital and banking markets. Banks and capital markets should complement each other in channelling savings for productive uses and fostering investment in innovative firms. Second, moving towards CMU and banking union should also reflect the ambition we have shown in our supervisory and regulatory set-up. It should support a coherent European response to new challenges such as Brexit and the development of non-bank finance. And it should not shy away from addressing gaps in our regulatory and institutional framework.