European Capital Markets

Market development entails both seizing new opportunities and making sure that existing frameworks are fit for purpose. Fintech, for example, opens up new sources of funding and new opportunities for investors, such as crowdfunding. And the work by the EU technical expert group on sustainable finance, published last week, will help deepen the market for "green" investments by laying out a common taxonomy for sustainable financial instruments.

The ECB is supporting market development efforts by establishing state-of-the-art market infrastructures. In November last year, for example, the ECB launched Target Instant Payment Settlement (TIPS), which allows payment service providers to offer funds transfers to customers in real time and around the clock across Europe. We have also launched a market consultation on a European mechanism for the issuance and initial distribution of debt securities (EDDI), to which we expect comments before 9 July.

Cutting red tape also supports market development. I welcome the current work by the European Commission to consider ways to encourage SMEs to tap capital markets for their financing needs more often. But incentives must be aligned, too. In particular, preferential tax treatment contributes to pushing firms towards debt funding. This unequal treatment might incentivise excessive leverage and hinder effective private risk sharing.