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Household participation in capital markets



One of the main goals of the CMU is to encourage households to allocate more of their financial wealth in capital market instruments (CMIs) and less in bank deposits. To assess the progress towards that goal, we proposed in a report published in November 2020 to monitor the variation in the ‘CMI ratio’, which is the ratio between the household savings invested in CMI and those placed in deposits, as a KPI.


Monitoring the variation in the CMI ratio offers three important advantages:


  • This ratio is rooted in the principle that the most effective way to encourage household participation in capital markets is to incentivise households to shift part of their savings from bank deposits towards CMIs, such as investment funds, stocks and bonds.
  • It simultaneously assesses the relative importance of bank deposits and CMIs in the households’ financial wealth.
  • The higher the CMI ratio, the more households are participating in capital markets.

AFME has included our CMI ratio in its annual report Capital Markets Union – Key Performance Indicators’ (see p. 32).


The graph below shows that the EFAMA CMI ratio remains below pre-COVID levels. This indicates that new household savings have been predominantly allocated into bank deposits instead of capital markets instruments since the start of the pandemic. Many households continue to rely on  savings in bank deposits, even though  inflation actually causes their money to be worth less year on year.  We have illustrated this point in a brochure titled ’Investing for a better future – 5 tips to do more with your savings’.  The brochure aims at stimulating millennials to consider investing early and explains how to get started.


EFAMA CMI ratio: EU households’ capital markets investments as % of household deposits




Our report showed that the situation varies markedly between Member States, and the most effective tools to foster retail investments in capital markets lie within the power and the responsibilities of national authorities. Therefore, we strongly believe that the European Commission should measure progress at a national level.  Such monitoring should go hand in hand with a review of the measures taken by Member States to encourage their citizens to save more in capital markets.


We also strongly support the AFME report’s recommendation that the success of the European Commission’s strategy to foster household capital market participation will depend on the following essential elements:


(1) easy access to financial advice for retail investors to ensure that investments are suited to their individual needs and preferences;

(2) no dismantlement of the existing EU distribution model that would make it harder for less affluent citizens to access much-needed financial advice;

(3) greater efforts to strengthen financial literacy and foster a better understanding of capital markets;

(4) alignment of financial disclosures across various regimes, to provide meaningful – rather than conflicting – information, including on ESG factors.


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