European Capital Markets and Bank-Bias in the EU
By Alter5 . Published 05 Oct, 2021
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One of Alter 5’s primary goals is to connect renewable energy developers and promoters with capital markets investors. Our goals align closely with those of the EU’s Capital Markets Union (CMU), which seeks to foment growth in European capital markets in a financial system dominated by banks: In 2013 alone, the total assets of European banks amounted to 334% of EU GDP (€42tn), while their counterparts in the U.S. (a comparable market) held the equivalent to just 88% of U.S. GDP (€11tn). Today, while market capitalization in the U.S. is equivalent to 163% of GDP, it is only 56% of GDP in the EU. The dominance of banks in European financial markets means that project developers and SMEs are heavily reliant on liquidity flowing from the EU’s banking sector. However, as regulations governing banks have become more stringent since 2008, banks have been increasingly risk-averse, leaving project developers in new and growing sectors like renewable energy with a limited pool of investors to draw from. The CMU marks a first step in the EU’s attempts to address this shortfall. In this article we explore what are notes on the EU’s financial system, and the future of its capital markets.
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