The European Capital Markets Union and the shadow banking system – interconnectedness and contradictions
Abstract
The development of capital markets is crucial to the competitiveness of the European Union. Two EU projects are focused on this: the creation of a Capital Markets Union and the transformation of the EU shadow banking system into a transparent, stable, and well-regulated financial market segment. Despite numerous action plans, programmes, and legislative measures, both projects have achieved only very modest success. In this article, we analyse the two projects together to explore their similarities, interconnectedness, and contradictions. We point out that a series of regulatory changes is not enough to develop and integrate European capital markets; more profound interventions and steps to break entrenched structures are needed.
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