Navigating the storm: Setting long-term goals in volatile market conditions?

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The 2015 ECMI Annual Conference was organised in cooperation with Imperial College London and brought together academics, policymakers and market participants from across Europe and beyond. The conference was opened by a wide-ranging and in-depth keynote speech delivered by European Commissioner Jonathan Hill, who described Capital Markets Union (CMU) as a classic single market project, intended for all 28 member states. The Action Plan takes a long-term view, aiming to build CMU step-by-step and bottom-up, he said, by identifying barriers and eliminating them down one by one. This approach is in contrast to Banking Union, which is a top-down project.

The first session of the conference was devoted to a discussion of the key factors that will drive further financial integration and private cross-border risksharing but also the interplay between the implementation of financial regulation and the organic development of larger and more liquid capital markets across the EU.

The effectiveness of quantitative easing (QE) programmes conducted by major central banks and the path towards a normalisation of monetary conditions were analysed in the second session, with panellists voicing concerns over excessive risktaking behaviour, distorted market prices and redistributive effects.

In the third session, panellists argued that a structural shift towards more market-based finance is inevitable. A vast restructuring of the financial landscape is already under way with asset managers fundamentally changing the way in which financial markets function, but it will take decades for capital markets intermediation to become mainstream.

In the final session, the need to reconsider the regulatory framework around margining requirements and crisis management of centralised market infrastructures, such as CCPs, was highlighted. The large exposures of CCPs and their extensive interconnections can make them systemically vulnerable. Confidence in underlying markets could be severely tested if CCPs’ activities were to be disrupted.