New report calls for action to be taken to revive the Capital Markets Union project
Today EFAMA published a report analysing the progress made in recent years by European households in recent years in allocating more of their financial wealth to capital market instruments (pension plans, life insurance, investment funds, debt securities and listed shares) and less in cash and bank deposits.
Some key findings include:
- European households increased their holdings of cash and bank deposits from EUR 10,260 billion in 2015 to EUR 13,944 billion in 2022, or from 36.7% of their financial wealth to 41.1%. In parallel, the ratio between the capital market instruments and the cash and bank deposits held by households fell from 1.73 in 2015 to 1.43 in 2022. The massive increase of savings in deposits was driven by the pandemic in 2020 (EUR 1,054 billion) and the financial market downturn in 2022.
- Households increased their investments in capital markets to EUR 578 billion in 2021 and EUR 574 billion in 2022, compared to an annual average of EUR 303 billion in 2015-2019. However, the increase in bank deposits remained substantial: EUR 713 billion in 2021 and EUR 486 billion in 2022.
- There remain considerable differences in the way households allocate their savings across Europe. In Denmark, Sweden and the Netherlands, households hold less than 30% of their financial wealth in deposits. However, in 2022 the share of deposits exceeded 70% in Malta, Portugal, Lithuania, Bulgaria, Slovenia, Poland, Cyprus and Greece.
- There are five elements that explain the varied composition of household portfolio across Europe:
- The role of funded pensions in national pension systems
- The extent to which households can expect a large State pension
- The level of gross national income per capita
- The level of financial literacy
- The tax incentives available for investments
- Some countries made more headway between 2020-2022 than others. Slovakia, Germany, Norway, Denmark, Luxembourg, Finland, Italy, Austria, Belgium, and the Czech Republic made the most progress. The fact that these countries are quite different in terms of total population, economic weight, and financial development confirms that progress toward greater participation in capital markets can be achieved in any country.
The report also makes several policy recommendations, including:
- Boosting access to, and coverage of, funded occupational and personal pensions, including:
- Developing pension tracking systems to inform citizens about what retirement income they can expect,
- Implementing mechanisms of auto-enrolment for occupational pension plans,
- Revising the Pan-European Personal Pension Product to allow the PEPP market to take off,
- Integrating the European Retirement Week into the EU official calendar to enhance awareness about the need to save more for retirement.
- Keeping access to affordable and quality financial advice for all EU citizens. This requires that the Retail Investment Strategy preserves the existing distribution system for investment products which allows EU citizens to have access to affordable and quality financial advice no matter the size of their investment.
EFAMA’s Senior Director, Bernard Delbecque commented: “If Member States want to foster retail investments in capital markets in a meaningful way, their priority should be to create the right conditions for EU citizens to save more for their pensions. By pursuing this approach in a determined way, Member States would adequately respond to the triple challenge of reducing pension inadequacy risks, advancing the Capital Markets Union, and mobilizing an important source of capital for the European economy to take up the sustainability challenge.”
EFAMA’s Director General, Tanguy van de Werve added: “Our report shows that decisive actions are needed at European and national level to encourage more Europeans to become long term investors. The Commission’s Retail Investment Strategy should ensure that European investors have access to affordable and quality advice, that the digital distribution of investment products is facilitated and that disclosures are understandable and decision useful. Also, we encourage regulators to stress the benefits of investing instead of putting off people by constantly focusing on costs and risks, especially as costs are overall decreasing and risks can be diversified away and generate higher real returns.”
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Notes to Editors
You can access the full report, as well as country statistical profiles, here.
To learn more about our work on retail participation in capital markets, visit our website here.
For further information, please contact:
Head of Communications & Membership Development
Tel: +32 2 548 26 52