Verena Ross, chair of European Securities and Markets Authority, a pan-EU financial regulator, has issued a stark warning about the state of capital markets in the European Union, calling for urgent reforms to enhance resilience, integration and competitiveness. Speaking at the in Paris on 5 February 2025, Ross emphasised the critical need for a bold vision to break Europe’s fragmented financial landscape and ensure capital markets can support the region’s long-term economic ambitions.
In her keynote speech, Ross declared, “Necessity is upon us, and our choice is stark: either keep drifting until a bigger crisis forces our hand, or rise to the occasion and shape the future of EU capital markets on our own terms.” The speech outlined the key structural challenges facing European capital markets and the need for immediate, coordinated action.
Capital markets
Ross opened by reflecting on the historical significance of capital markets, describing them as a “force that propelled economies forward.” She pointed to their role in funding the industrial revolution, post-war European reconstruction and the economic transformation of Central and Eastern Europe after the fall of the Berlin Wall. The rapid rise of the Warsaw Stock Exchange, she noted, was instrumental in Poland’s transition from an emerging economy to a developed one, demonstrating how markets can be a catalyst for change.
However, she stressed that while capital markets have evolved to meet past challenges, today’s economic and geopolitical landscape demands even greater transformation.
AI, climate and geopolitical uncertainty
Ross identified technological disruption, climate change and geopolitical instability as the defining challenges of the present era. With artificial intelligence driving a new industrial revolution, she noted that “history never repeats itself, but it often rhymes”--borrowing a phrase from Mark Twain to highlight the similarities between past economic shifts and today’s transformations.
Climate change, she argued, presents not just an economic challenge but an existential imperative. The recent wildfires in California and flash floods in Spain are stark reminders that transitioning to a green economy cannot be shouldered by the public purse alone. Private investment must play a bigger role in financing green infrastructure and technological innovation.
Compounding these economic shifts is geopolitical uncertainty, with Ross citing European Commission president Ursula von der Leyen’s assertion that “we have entered a new era of harsh geostrategic competition.” The EU, while remaining the world’s largest trading bloc, must reassess its strategic needs to maintain resilience and global competitiveness.
Capital market fragmentation
One of the most urgent issues raised by Ross is the fragmentation and complexity of EU capital markets, which lag behind global peers in both size and depth. She warned of a vicious cycle where:
· Inefficient capital markets fail to finance innovation and growth.
· This stifles the emergence of dynamic, competitive European companies.
· Without attractive companies to invest in, private capital remains dormant or flows abroad.
· As a result, European entrepreneurs and businesses either fail to realise their potential or relocate outside the EU.
This cycle, she stressed, “ultimately stifles the EU’s competitiveness and curtails our economic dynamism.” The solution? Transforming this vicious cycle into a virtuous one--where strong capital markets fuel innovation, attract investment, and drive sustainable growth.
European vision
Ross made it clear that Europe must develop its own vision for capital markets, rather than simply replicating the US model. “Too often I hear EU capital markets compared to the US, as if to say that by copying what they do, we too can simply reproduce their success,” she remarked. Instead, Europe must define a strategy “grounded in its unique strengths and values.”
A key part of this vision is greater integration. Ross argued that while the EU’s capital markets must be more unified, this does not mean creating a single, centralised marketplace. Instead, she called for a system where capital can flow freely across borders, while still preserving the unique strengths of individual national markets.
Ross also highlighted the need for regulatory and supervisory reform to make European markets more attractive and competitive. While she acknowledged that “EU capital markets are often characterised by their comprehensive regulatory and supervisory frameworks,” she stressed the importance of simplification and agility. “We must make capital markets more accessible, more straightforward and more aligned with people’s financial aspirations,” she urged.
Ross closed her speech with a reminder from the EU founding father Jean Monnet: “People only accept change when faced with necessity, and only recognise necessity when a crisis is upon them.”
For Europe, that necessity is already here, argued Ross. The EU must act decisively to reform and strengthen its capital markets--not just to compete globally, but to build a resilient, inclusive and forward-looking financial ecosystem that serves both businesses and citizens.