AFME releases sixth edition of capital markets performance report
10 November 2023 Europe
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The Association for Financial Markets in Europe (AFME) has released the sixth iteration of its ‘Capital Markets Union — Key Performance Indicators’ report.
The report, constructed in collaboration with eleven other European and international organisations, tracks Europe’s capital markets’ progress across nine key performance indicators (KPIs).
According to the report, some KPIs have seen slight improvements — mostly due to cyclical factors, AFME says, given the year’s market turbulence.
In the medium-term, the EU has not made significant progress in developing its capital markets, the report says. This is particularly apparent in terms of global competitiveness. The EU remains “significantly behind” the US and UK, according to AFME’s global competitiveness indicator, especially around access to finance, market liquidity and digital finance capabilities.
Additionally, EU capital markets have not demonstrated notable developments over the 30 years that the Single Market has been in existence. AFME calls the data points in this field “disappointing”, stating that “there has been little change, including in a global context”.
Initial public offerings (IPOs) have also seen a bad year in the EU, with issuance falling 72 per cent in H1 2023 in comparison to H1 2022. If the current climate continues, 2023 will be the lowest corporate IPO issuance volume since 2011, the report warns.
On a more positive note, the appetite for market financing has increased over the past year. Non-financial corporate funding derived from capital markets sources jumped from 7.8 per cent to 10.3 per cent between 2022 and 2023. However, in a broader context this figure remains below 2021’s 14 per cent peak, and the 11.5 per cent figure seen from 2016 to 2019.
Securitisation issuance has “bounced back” since 2022, the report found, however this was primarily due to a €49.5 billion French residential mortgage-backed security deal. If this deal is excluded, the EU could have seen a 15 per cent decline in this space. AFME highlights the low levels of securitisation in the EU when compared to other global economies,
Capital access for small- and medium-sized enterprises has declined over the year, impacting early-stage funding, private equity and crowdfunding strategies, the report says.
Considering ESG-labelled bonds, issuance in the EU counted for 12.7 per cent of total EU bond issuance over the year. This marks the EU as a “global leader” in ESG bond origination, standing above the average 1-7 per cent seen from other regions.
Fintech investments in the EU have decreased significantly in comparison to 2022, falling 78 per cent compared to the previous year. This figure is higher than the US’ approximate 65 per cent reduction in investment, but is only slightly lower than the UK’s 80 per cent drop.
Alongside this, valuations of fintech unicorns decreased in value, cumulatively, by a fifth. In the UK, this figure was 15 per cent.
Adam Farkas, chief executive of AFME, says: “All the planned measures from the CMU Action Plan of 2020 have now been delivered by the Commission and EU leaders earlier this year committed to finalising negotiations on any open CMU issues before the next EU elections. However, certain goals, such as rebalancing the EU's funding sources toward more market-based financing, channelling individual savings into productive investments, and integrating national capital markets to create a unified EU market have not yet materialised to any meaningful degree.
“The financing structure of the EU economy will need to adapt, and at pace, if it is to support the EU’s significant and transformative investment needs, including the fast-approaching climate goals of 2030, as well as its demographic and competitiveness challenges.
“The growth of an integrated capital market for Europe must continue to be a key priority if the European Union is to achieve its dual goals of sustainable and digital economic transformation.”
The report, constructed in collaboration with eleven other European and international organisations, tracks Europe’s capital markets’ progress across nine key performance indicators (KPIs).
According to the report, some KPIs have seen slight improvements — mostly due to cyclical factors, AFME says, given the year’s market turbulence.
In the medium-term, the EU has not made significant progress in developing its capital markets, the report says. This is particularly apparent in terms of global competitiveness. The EU remains “significantly behind” the US and UK, according to AFME’s global competitiveness indicator, especially around access to finance, market liquidity and digital finance capabilities.
Additionally, EU capital markets have not demonstrated notable developments over the 30 years that the Single Market has been in existence. AFME calls the data points in this field “disappointing”, stating that “there has been little change, including in a global context”.
Initial public offerings (IPOs) have also seen a bad year in the EU, with issuance falling 72 per cent in H1 2023 in comparison to H1 2022. If the current climate continues, 2023 will be the lowest corporate IPO issuance volume since 2011, the report warns.
On a more positive note, the appetite for market financing has increased over the past year. Non-financial corporate funding derived from capital markets sources jumped from 7.8 per cent to 10.3 per cent between 2022 and 2023. However, in a broader context this figure remains below 2021’s 14 per cent peak, and the 11.5 per cent figure seen from 2016 to 2019.
Securitisation issuance has “bounced back” since 2022, the report found, however this was primarily due to a €49.5 billion French residential mortgage-backed security deal. If this deal is excluded, the EU could have seen a 15 per cent decline in this space. AFME highlights the low levels of securitisation in the EU when compared to other global economies,
Capital access for small- and medium-sized enterprises has declined over the year, impacting early-stage funding, private equity and crowdfunding strategies, the report says.
Considering ESG-labelled bonds, issuance in the EU counted for 12.7 per cent of total EU bond issuance over the year. This marks the EU as a “global leader” in ESG bond origination, standing above the average 1-7 per cent seen from other regions.
Fintech investments in the EU have decreased significantly in comparison to 2022, falling 78 per cent compared to the previous year. This figure is higher than the US’ approximate 65 per cent reduction in investment, but is only slightly lower than the UK’s 80 per cent drop.
Alongside this, valuations of fintech unicorns decreased in value, cumulatively, by a fifth. In the UK, this figure was 15 per cent.
Adam Farkas, chief executive of AFME, says: “All the planned measures from the CMU Action Plan of 2020 have now been delivered by the Commission and EU leaders earlier this year committed to finalising negotiations on any open CMU issues before the next EU elections. However, certain goals, such as rebalancing the EU's funding sources toward more market-based financing, channelling individual savings into productive investments, and integrating national capital markets to create a unified EU market have not yet materialised to any meaningful degree.
“The financing structure of the EU economy will need to adapt, and at pace, if it is to support the EU’s significant and transformative investment needs, including the fast-approaching climate goals of 2030, as well as its demographic and competitiveness challenges.
“The growth of an integrated capital market for Europe must continue to be a key priority if the European Union is to achieve its dual goals of sustainable and digital economic transformation.”
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