Europe has spent decades building a single market. Yet when it comes to capital, national borders remain remarkably resilient.
The recent agreement among EU finance ministers on the Market Integration and Supervision Package offers another opportunity to address this contradiction. The timing is particularly significant: on the same day, Carlo Comporti was appointed the next Chair of the European Securities and Markets Authority (ESMA), which is expected to assume a greater role in overseeing Europe's financial markets.
Together, these developments raise a fundamental question: can Europe create a genuinely integrated capital market without sacrificing the diversity and competitive advantages of its national financial centres?
The answer matters far beyond Brussels, Paris or Frankfurt. It matters to businesses seeking financing, financial institutions operating across borders and millions of Europeans who should be able to participate more easily in the continent's economic growth.
Fragmentation is Europe's hidden cost
The European Union has no shortage of savings. According to the Council of the EU, approximately €10 trillion in household savings remains in low-yield bank deposits. Meanwhile, European businesses, particularly innovative and fast-growing companies, continue to face difficulties accessing capital on a scale comparable to their American counterparts.
This is not simply a question of financial culture or investor appetite. It is also a structural problem.
Despite decades of harmonisation, financial institutions operating across the EU still encounter differences in supervisory practices, administrative procedures and interpretations of common rules. A company may hold a European licence and serve clients across multiple member states while navigating a regulatory environment that remains fragmented in practice.
These differences carry costs. They consume resources that could otherwise support innovation, better services and market expansion. More importantly, they make it harder for European financial businesses to achieve the scale required to compete globally.
The objective should therefore be straightforward: make Europe's existing single market work more effectively.
The Cyprus perspective: small markets, European ambitions
The debate becomes particularly interesting when viewed from Cyprus.
As a smaller EU member state with an internationally oriented financial services industry, Cyprus has a direct interest in more consistent European supervision and fewer obstacles to cross-border business.
Finance Minister Makis Keravnos described the October 9 agreement as an honest compromise, while acknowledging that it fell short of Cyprus's original preferences. This reflects a legitimate concern shared by smaller financial centres: deeper integration should not come at the expense of their ability to participate meaningfully in shaping the regulatory framework.
Cyprus has spent years developing its role as a base for internationally oriented financial services, technology companies and investment businesses operating across European markets.
This illustrates an important point: smaller member states can play a disproportionately significant role in Europe's financial ecosystem.
Their value lies not in regulatory differences, but in the expertise, infrastructure, entrepreneurial culture and international connections they develop.
A genuinely integrated market should strengthen these advantages, not erase them.
Better supervision does not necessarily mean more supervision
The central question surrounding ESMA's expanding role should not be whether Brussels and Paris gain authority at the expense of national regulators.
It should be whether the proposed changes deliver clearer rules, greater consistency and better outcomes.
There are compelling arguments for stronger European coordination, particularly when financial institutions and market infrastructure operate across numerous jurisdictions. Investors should expect comparable standards of protection regardless of where a financial service provider is established.
But centralisation is a means, not an end.
If businesses find themselves facing additional administrative requirements layered on top of existing national obligations, Europe risks replacing one form of complexity with another.
Equally, national regulators possess market knowledge and institutional experience that should remain part of the European supervisory architecture.
The most effective model will combine consistent European standards with proportionality, practical expertise and accountability.
This is particularly important for smaller and innovative market participants, which cannot always absorb regulatory complexity as easily as large financial institutions.
Investor protection and innovation belong on the same side
The financial industry sometimes presents regulation and innovation as competing forces. I believe this is a false choice.
Trust is the foundation of financial participation. Without confidence in market integrity, transparency and the protection of investors, efforts to encourage Europeans to move from saving to investing will achieve little.
At the same time, innovation has transformed access to financial markets. Digital investment platforms have reduced practical barriers, broadened access to financial instruments and made investing more accessible to people who might previously have viewed it as the preserve of wealthier individuals.
The next stage of European financial integration should build on these developments while ensuring that technological progress is accompanied by responsible practices, transparent information and meaningful investor education.
Ultimately, the success of the Savings and Investments Union will not be measured solely by the redistribution of supervisory responsibilities or the number of legislative amendments adopted.
It will be measured by whether European citizens find it easier to invest confidently, whether businesses gain better access to capital and whether financial institutions can operate efficiently across national borders.
A single market should create opportunities, not new dividing lines
The compromise reached by EU finance ministers is an important political step, but the legislative process is not over. The European Parliament will have its say, and the final framework may still evolve.
There is a risk that exemptions negotiated for particular market participants could weaken the consistency that the reforms seek to achieve. Equally, legitimate concerns about proportionality and the representation of smaller member states should not be dismissed as obstacles to integration.
Europe needs to reconcile these competing priorities rather than allow them to become another reason for inaction.
For Cyprus and other smaller financial centres, this is also an opportunity to demonstrate that their competitiveness rests on substance: professional expertise, technological capabilities, responsible supervision and the ability to connect local talent with international markets.
A successful European capital market should make geography less important as a regulatory barrier while allowing different financial centres to contribute according to their strengths.
Europe does not need to choose between investor protection and innovation, between national expertise and European coordination, or between large financial centres and smaller ones.
It needs a regulatory framework capable of bringing these elements together.
After all, the purpose of a single market is not to make every participant look the same.
It is to give them a fair opportunity to compete, innovate and grow under rules that genuinely work across borders.
*Bulat Latypov, Chief Communications Officer, Freedom24
