Market Building and the Capital Markets Union: Addressing Information Barriers in the SME Funding Market

(2017) 14(2) European Company and Financial Law Review 271-313

31 Pages Posted: 6 Mar 2017 Last revised: 14 Nov 2017

See all articles by Pierre Schammo

Pierre Schammo

Durham University, School of Law

Date Written: March 3, 2017

Abstract

The Capital Markets Union (CMU) is one of the flagship policy initiatives of the Juncker Commission. The Commission’s strategy for realizing a CMU is set out in its White Paper on building a CMU. Besides describing the Commission’s vision of a CMU, the white paper includes an action plan which details the measures that are needed to build a CMU. The aim of this article is to consider the Commission’s measures in one particular area of the action plan. Specifically, this article examines the Commission’s strategy for overcoming information barriers to SME investment. By acting in this area, the Commission’s objective is to facilitate access to finance, but also to diversify sources of funding for SMEs, which are traditionally heavily dependent on bank-based finance. This article evaluates the Commission’s strategy and its prospects of success. After assessing the relevant policy measures, it will argue for a paradigm shift which is based on three pillars: a greater emphasis on market building measures; a greater emphasis on information sharing duties as one mechanism that can help to address information barriers; and a market correcting strategy to dovetail greater market building.

Keywords: Capital Markets Union, SME, information sharing, relationship banking, information asymmetries, finance platforms, credit bureaus, credit reference agencies

JEL Classification: K20, K22, G18, G20, G28, K23, G38

Suggested Citation

Schammo, Pierre, Market Building and the Capital Markets Union: Addressing Information Barriers in the SME Funding Market (March 3, 2017). (2017) 14(2) European Company and Financial Law Review 271-313, Available at SSRN: https://ssrn.com/abstract=2927111 or http://dx.doi.org/10.2139/ssrn.2927111

Pierre Schammo (Contact Author)

Durham University, School of Law ( email )

The Palatine Centre
Stockton Road
Durham, Durham DH1 3LE
United Kingdom

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