Citi: Europe reimagines capital markets through harmonisation

Europe has the chance to reposition itself as an attractive destination for investment and innovation even as it grapples with geopolitical uncertainty and macroeconomic volatility, according to Citi Global Perspectives & Solutions (GPS).

The region’s capital markets infrastructure consists of an array of often unconnected trading venues, clearing houses, settlement systems, central counterparties and data and technology providers - all of which are fragmented across the various countries in the region. This fragmentation has implications for capital formation, liquidity, costs and efficiency.

This Citi GPS report identifies gaps in the infrastructure ecosystem and highlights potential steps to unlock an integrated capital market in Europe through harmonising post-trade processes. As leaders gather for the annual World Economic Forum in Davos, Switzerland, Citi hopes that the report will resonate with attendees.

Key highlights from the report

Around 63% of its fourth quarter 2025 (4Q25) survey respondents cite significant gaps in regulation, policy, taxation and operational processes which need to be addressed. Only 7% believe most barriers to harmonisation have been addressed.

The capital market fragmentation in Europe has contributed to a capital formation gap. Between 2020 and 2025, the value of initial public offerings (IPOs) in EU was 0.6% as a percentage of gross domestic product (GDP) compared with 2.1% for the US. The proportion of European IPOs listing in the US has tripled since 2015 to 22% of all IPOs by European companies by value.

Reducing the number of central securities depositories to fewer than 10 from 30+ today could bring price efficiency and help create a single market structure.

About 43% of survey respondents cite legal and regulatory inconsistency as one of the primary drivers for capital markets fragmentation.

Harmonisation could be achieved by the creation of a single pan-European regulator with the aim of applying common capital markets rules across all member states and the elimination of ‘gold-plating’.

Technologies such as AI, distributed ledger technology and tokenisation could help increase transparency and accelerate the journey toward a more harmonised and standardised post-trade ecosystem.

Re-disseminated by Wealth and Society