EU SINGLE FINANCIAL MARKET: ILLUSION OR REALITY?

The building of the Single financial market (SFM) has always been the integral part of the Common European market and now is closely connected with the development of the Economic and Monetary Union (EMU) and strengthening the role of Euro as a common European as well as international currency. The article reviews the formation of the SFM from its very beginning (liberalization of the capital flows inside the Community and introducing the single passport for financial services in 1980-s) up to the Banking Union (BU) and Capital markets Union (CMU) nowadays. The authors underline that the process is time-consuming and not lineal. That is why the targets and implementation timetable of the action plans very often are revised according to the new environment and new challenges. The main focus of the research is the building of the SMU in close relation with BU. Analysis shows that though banks are and will remain the essential element of the EU financial system, the domination of the bank-based lending over market-based now complicates Europe's balancing its financial risks, more effective funding of digital economy and small and medium-sized enterprises, lead on sustainable development. That was the main reason for the adoption of the CMU action plan (2015-2019), but as it is shown in the article, the targets were achieved only in a small part. The analysis of the statistical data, done by the authors, proves that in spite of measures, adopted by European institutions, the national capital markets remain fragmented, less liquid and diversified than their competitors worldwide. This conclusion is confirmed by Key Performance Indicators (KPI) analysis for CMU, done annually by the Association for Financial Markets in Europe (AFME). According to AFME data for 2018 the best result is achieved for Sustainable Finance Indicator and one of the poorest - for Fintech Indicator. These shortcomings are aggravated by Brexit. So the new start for CMU was launched, partly inspired by European Commission, in 2019-2020 by the European experts reports, which are reviewed in the article. The authors came to the conclusion, that theoretically new proposals contain a lot of useful ideas, including the focus on retail clients and SMEs, long term savings and new investment opportunities for real economy, FinTech, etc. But the practical implementation is quite another thing. Building the European Single market for capital in the near future seems to be doubtful because of numerous barriers originating from national law, different levels of economic and financial development, financial culture of savers and investors and least but not last the absence of the real political support of the national authorities. To transform their aspiration to reality Europe needs the determined actions not only from the European institutions, but from Member States national governments and financial regulators, financial industry itself, savers and investors, including households.