Europe's Push to Convert Savers into Investors: A Contentious Regulatory Landscape
By Detlef Fechtner, Brussels
The Core Issue Surrounding Small-Scale Investors
The EU's banking sector is sitting on a colossal sum of around 10 trillion euros in deposits, as per estimates by the EU Commission. Although these funds are secure and easily accessible, they generally offer less long-term return compared to investments in financial markets. The EU authority urges savers to consider their dormant riches and capitalize on opportunities for higher returns.
However, the path to persuading more Europeans to invest their savings isn't straightforward, as the EU Commission, Council, and Parliament struggle to find common ground on which regulations would be helpful and which would not.
Taking Aim at Barriers
The EU Commission is expected to table new legislation in Q4 2025 to dismantle barriers that restrict the distribution of EU-authorized funds across member states. This move aims to make it simpler for investors to discover and invest in a variety of financial products, thereby fostering a more dynamic investment landscape.
Pushing for Institutional Investment
By the end of 2025, measures will be implemented to motivate institutional investors, such as insurers, banks, and pension funds, to invest more in equities. Part of this effort will involve setting criteria for favorable prudential treatment under regulatory frameworks like Solvency II and the prudent person principle for pension funds.
Harmonizing Taxation Procedures
The Commission plans to standardize national taxation procedures to streamline the free movement of capital and encourage cross-border investment.
Supporting SMEs and Innovation
The Listing Act will be implemented to make EU public markets more attractive, particularly for small and medium-sized enterprises (SMEs), by reducing administrative burdens and simpifying listing requirements.
Embracing the Private Market
Measures will be introduced in Q3 2026 to support exits for investors in private companies, potentially through multilateral intermittent trading of private company shares.
A Unified Front Among Institutions
The Parliament and Council are working on harmonizing rules for investment products and ensuring that regulatory changes are adopted uniformly across all member states. This involves trilogue negotiations between the Commission, Council, and Parliament to finalize new laws.
Bolstering Commission Oversight
The Parliament has endorsed enlarging the Commission's powers to intervene in cases where national regulations create fragmentation or excessive complexity. The goal is to support a more unified investment environment across the EU.
Managing Foreign Investment
Although focused on security and public order, recent legislation also indirectly supports a stable and transparent local investment environment by reducing uncertainty and protecting critical sectors from undue foreign influence.
The strategy encompasses an overall goal to increase capital market integration, boost the equity culture, and support SMEs and innovation. The EU aims to create a more seamless investment environment, stimulate happy-go-lucky savers to invest their dormant riches into more productive investments, and make public and private markets more accessible and attractive to both investors and businesses.
| Institution | Key Actions and Proposals ||------------------|------------------------------------------------------------------------------------------------------------------|| Commission | Proposes legislation to remove barriers, harmonizes taxation, supports SMEs, encourages institutional investment || Parliament | Endorses regulatory harmonization, supports Commission oversight, engages in trilogue negotiations || Council | Participates in negotiation and adoption of new regulations, ensuring member state buy-in and implementation |
In essence, the EU institutions are collaboratively addressing the regulatory divide by streamlining rules, fostering harmonization, and incentivizing investment, with the goal of redirecting European savings into more productive opportunities within the Union.
- To boost personal-finance opportunities and foster a more dynamic investment landscape, the EU Commission is anticipated to propose legislation in Q4 2025, aiming to dismantle barriers that restrict the distribution of EU-authorized funds across member states, and implement measures by the end of 2025 to motivate institutional investors to invest more in equities.
- Recognizing the importance of finance and investing in personal-finance growth, the EU Parliament is working on harmonizing rules for investment products, endorsing regulatory harmonization, and supporting the Commission's oversight to create a more unified investment environment across the Union.
