Capital Markets Union and regulation of the EU's capital markets

The European Union (EU) is currently carrying out an ambitious plan to change the way in which its capital markets operate (the Capital Markets Union Action Plan). The objectives include initiatives to stimulate growth and employment by improving funding of the real economy. These involve giving EU businesses, both major companies and small- A nd medium-sized enterprises, better access to capital markets and making funding on those markets more efficient and cheaper, thus reducing reliance on bank funding and rebalancing funding towards capital markets. They also include initiatives to increase retail access to capital market investments. This article looks at the current regulatory regime in the EU and examines some of its deficiencies, the reasons for them and their effect on the achievement of the EU's previous plan for capital markets (the Financial Services Action Plan).It then looks at the main tools that can be used to regulate capital markets and examines some of their advantages and defects-what they can and cannot do. And, in conclusion, it suggests how better regulation-and better markets-can result from a process involving clear definition of objectives at the outset, followed by judicious use of the regulatory tools in combination, designed to achieve those objectives and in knowledge of their limitations. © 2017 Author.