A new policy package from the European Commission is aiming to transform the way financial services operate across Member States, with the goal of creating a truly unified market for savings, investments, and capital flows.
The reforms are part of the Savings and Investments Union (SIU) strategy and are designed to remove long-standing barriers that have limited the EU’s competitiveness, particularly when compared with the US, said Finextra.
The Commission stated that despite recent efforts, EU financial markets remain fragmented, small and inefficient. In 2024, the market capitalisation of EU stock exchanges was equal to 73% of GDP. In the US, stock market capitalisation reaches around 270% of national GDP, highlighting the scale disadvantage facing European markets. The Commission argues that this lack of scale, combined with differing regulatory requirements between Member States, restricts cross-border participation and makes capital markets less appealing to investors and companies.
The package aims to streamline regulation, reduce supervisory complexity and encourage a more seamless flow of investment activity. Key actions include simplifying access for Regulated Markets and Central Securities Depositories (CSDs), introducing a single ‘Pan-European Market Operator’ licence, and reducing administrative burdens for UCITS and AIF investment fund distribution. The Commission believes these steps will lower costs and create a clearer operating environment for firms looking to scale across borders.
Another core element focuses on innovation, particularly the use of distributed ledger technology (DLT) across the financial sector. The proposal includes amending the DLT Pilot Regulation to improve proportionality, increase flexibility and provide greater legal certainty for firms adopting new digital infrastructure in areas such as post-trade settlement and market infrastructure. These changes are intended to remove regulatory obstacles that may be slowing technological progress in European financial services.
The package also seeks to enhance supervisory standards by reducing national discretion and harmonising oversight. The proposal would give the European Securities and Markets Authority (ESMA) direct powers to supervise major trading venues, central counterparties, CSDs and crypto-asset service providers. Supporters argue that centralising supervision could improve resilience, eliminate duplication and strengthen risk monitoring across the EU financial system.
The reforms now move to negotiation and approval by the European Parliament and Council, with the Commission calling for the full package to be maintained when discussions begin. The proposals are closely aligned with wider EU priorities, including economic competitiveness, digital transformation, security and climate transition. The Commission has emphasised that deeper capital market integration is essential to ensure that European citizens have improved options to build wealth and that businesses of all sizes can more easily access funding.
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