Growing European capital markets: a shared agenda

By Carey Evans, Co-Head of BlackRock EMEA Government Affairs & Public Policy

The goal of deeper, more vibrant capital markets is rightfully a key pillar of Europe’s competitiveness agenda. Progress will require a focus on both increasing the supply of capital invested in European markets and stimulating greater demand for capital from European companies to invest and grow. This will require shared efforts across public and private sectors, at both EU and national level.

Capital markets are ecosystems that rely on the willing participation of a range of actors: from the savers who invest their capital to generate returns; to companies, governments and others that draw on that pool of savings to fund capital spending or investment; and a range of specialist intermediaries in between with the commercial incentives to innovate and improve market efficiency.

Like any ecosystem, success is rarely contingent on one part. Despite the urgency of the political agenda, there are unlikely to be quick, simple policy wins, and the most impactful changes may take time to bear fruit.

On the supply side, the focus should be on growing a deeper investor base. Europe does not lack capital, but high savings rates do not translate into high levels of either direct retail/ household investment or deep pools of funded pensions outside of a few Member States.

These two segments are critical foundations for capital markets. Retail investors bring important depth and diversity to capital markets. US households make up around 40% of the capital invested in US equity markets; in Europe, that number is closer to 10%. Pension funds, with their long-term investment horizons, are important investors across both public and private markets.

Addressing these supply gaps in Europe’s capital markets requires both conducive regulatory frameworks and appropriate incentives for savers to start investing. Encouragingly, on many fronts, these discussions are moving in the right direction.

Savings and Investment Accounts which make it easier and more attractive for citizens to invest in a broad range of assets are a practical step forward. Further, the new simplified advice framework under the Retail Investment Strategy (RIS) will enable the development of innovative services and products which improve investor outcomes, strengthen trust, instill confidence, and gradually enhance financial literacy across the EU.

Looking further ahead, the focus on the Pan-European Personal Pension Product (PEPP) presents an opportunity to design a more effective and compelling retirement solution. A well-calibrated PEPP could unlock long-term pension savings and support cross-border investment particularly in Member States where personal pension markets remain underdeveloped.

Efforts to increase investor participation and grow long-term savings are welcome on their own merits. But without an increase in ‘demand’ – more companies using capital to grow – additional capital supply could end up competing for the same existing investments, driving down returns without necessarily funding new economic activity.

Many European companies are today net savers, that is, they are retaining more in earnings than they are spending on investment. Policies that seek to increase investor participation in capital markets should be balanced with policies that promote business investment and hence, drive greater demand for capital from European companies.

Beyond the fundamentals of supply and demand, market structures and intermediaries can realise cross-border efficiencies in Europe which will make capital markets more effective. This again requires both public and private sectors working towards common goals. Regulatory change needs to create cross-border synergies, avoid adding new layers of requirements, as well as preserve the commercial incentives to innovate and improve service delivery across capital markets.

Asset managers will continue to play a central role in bridging savings and investment opportunities in Europe. Some of the proposed changes in the Market Integration and Supervision Package (MISP) – such as greater harmonisation of marketing rules, true reductions in supervisory duplications and reduced cross-border fragmentation – can deliver meaningful efficiency gains and help reduce costs for European savers.

At the market structure level, proposals that support innovation and digitalisation may further enhance market efficiency and open new channels for investment over time.

An impactful policy agenda could help Europe seize the momentum to catalyse meaningful long-term change. Deeper capital markets in Europe have the power to drive economic competitiveness, and at the same time, help more Europeans share in the upside of economic growth.

Disclaimer

This material is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or financial product or to adopt any investment strategy. The opinions expressed are as of September 2025 and may change as subsequent conditions vary. There is no guarantee that any forecasts will come to pass.

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