AFME publishes its 5th European Capital Markets Union Key Performance Indicators
Brussels, 17 November 2022. The fifth edition of the AFME “Capital Markets Union – Key Performance Indicators” report, tracking the progress of Europe’s capital markets against nine key performance indicators and analysing the progress over the past five years, has been published today with the collaboration of 11 other organisations. EUROCROWD is pleased to be, again, one of the supporters of the report, together with the European Fund and Asset Management Association, European Issuers, Alternative Credit Council, Pensions Europe, Invest Europe, Federation of European Securities Exchanges, European Investors, European Business Angel Network, Climate Bonds Initiative and Business Angels Europe.
The report, shows that Europe is falling further behind, especially compared to the United States, in attracting investment. The global share in market capitalisation of EU listed companies has fallen from 18% in 2000 to 10% in 2022. The findings of the fifth “Capital Markets Union – Key Performance Indicators” report were discussed at a dedicated event commemorating the state and future of the Capital Market Union (CMU).
Mairead McGuinness, European Commissioner for Financial Stability, Financial Services and the Capital Markets Union opened the discussion, outlining how the EU seeks to maintain competitiveness in the global markets, with the regulatory environment playing an important role in promoting the attractiveness of EU markets. But Mairead McGuinness also warned that “It is still early days for CMU” by comparing it with the long process of development that was needed to build the European single market. “The Capital Market Union will not be built overnight and breaking down the barriers between national capital markets will take a lot of intense and focused work” the Commissioner said.
Despite decline in global share of market capitalisation for European Capital Markets, there has been significant progress in the development of sustainable finance and digitalisation. Here the EU is maintaining its global leadership and despite the different shocks that affected the market the European market has proven to be resilient. Pre-IPO risk capital investment in SMEs in the EU remained relatively strong. Investments through private equity funds, venture capital, business angels and equity crowdfunding platforms provided capital totalling €34.3 billion in H1 2022.
In terms of equity crowdfunding, the report suggests a record for 2021, with more than double the amount invested in 2020. The H1’22 amount will exceed the 2020 total. The report points out that one of the factors that is driving this market development is the approval of the European regulation on European Crowdfunding Service Providers for Business (“ECSPR”).
The report includes a section of analytical comment boxes in different relevant markets in the EU, dedicating one of them to the competition in the crowdfunding market. In this analysis, the ECSPR has a special relevance to understand how the market is going to evolve. The analysis states that the crowdfunding market is now in a new phase of consolidation and higher competition between platform service providers.
The Capital Market Union in Europe is going through a long road, as highlighted by the commissioner who, in her own words, said “is good that the road is there but we didn’t have quite reach the end of our journey”.
Key findings of the report include:
- Socio-economic and geopolitical developments have caused a major reversal of capital markets activity in 2022 compared to the record gains of market-based financing levels of the previous two years.
- Market-based funding used by corporates dropped to pre-Covid levels - total new debt and equity issuances decreased by 32% year-over-year during the first half of 2022, with a particularly steep decline (86%) in EU Initial Public Offerings.
- Europe’s equity gap grew wider with the EU’s domestic market capitalisation of listed shares declining from 18% in 2000 to just 10% of the world’s total in 2022.
- Pre-IPO equity investment in EU SMEs remained strong with €34.3bn in new equity investment flows in the first half of 2022, or 73% of the amount invested in 2021.
- European households saw a decline in their savings in the form of capital markets instruments due to deterioration in asset values.
- EU securitisation transactions fell to lowest levels on record with the proportion of EU loans outstanding transferred via securitisation and loan portfolio sales falling to 1.6%, the lowest value on record and half the value in 2018 (3.2%). US securitisation issuance grew 74.5% during 2020-2021 vs 2017-2019, while EU issuance declined 10.9% over the same period.
- Remarkable ESG growth over last five years – with the amount of EU ESG debt issuance increasing from €61bn in 2017 to €360bn in 2021.
- An improved EU FinTech regulatory ecosystem:
While FinTech funding was down across the globe since the peak of last year, the number of EU Fintech unicorns increased from 13 to 18, suggesting an overall improvement in the environment for financial technology. Compared to 2021, three additional countries (Italy, Latvia, and Slovakia) deployed regulatory sandboxes. Now, 13 out of 28 countries (EU 27 + UK) provide this regulatory feature.