Ante Žigman at the "Challenge of Change" Conference: Regulation and digitalisation crucial for capital markets development
Capital markets must play a more active role in supporting businesses and economic growth, emphasised Ante Žigman, President of the Board of the Croatian Financial Services Supervisory Agency (Hanfa), at the "Challenge of Change" Conference. The event, traditionally organised by the Association of Pension Companies and Pension Insurance Companies and the Zagreb Stock Exchange, brought together over 500 participants, including leading experts from finance, economics and politics, in Rovinj this year.
In his presentation, Žigman highlighted several key challenges and opportunities for financial markets, focusing particularly on the European Union and Croatia. He began by noting that the reduction of inflationary pressures and the recovery of the European economy in the first half of 2024 present an opportunity for financial growth, while also warning about the still high level of economic uncertainty in Europe.
Global capital markets – the EU lags behind the U.S.
Žigman pointed out that despite the recovery, Europe still significantly lags behind the United States in the capital markets segment. "While the U.S. market dominates global market capitalization, European markets still rely too heavily on bank lending," he said. In his analysis, he noted that 70% of corporate financing in the EU is bank-related, whereas in the U.S., this share is much lower because capital markets play a crucial role in financing businesses. He emphasised the need for greater diversification of funding sources to enable European companies to compete globally.
Presenting data on market capitalization, Žigman noted that the U.S., despite accounting for only 17% of the world's GDP, holds nearly 70% of global market capitalization. This U.S. dominance demonstrates how the American capital market is far ahead of Europe's, affecting access to financing, corporate competitiveness, and economic growth speed. "Europe must work on integrating capital markets and promoting market-based financing through equity issuances," he said.
The importance of green and digital transitions
Žigman also highlighted that, while Europe is the leader in green financing and sustainable investments, the European Commission's target of EUR 700 billion in green investments has not yet been reached. "Sustainable development must be at the centre of the EU's financial policies in order to mitigate climate change and increase economic resilience," he stressed.
In addition, he talked about the need for digital transformation in the financial sector, warning that Europe is falling behind the U.S. in financial innovation and digitalisation. He stressed the importance of developing new technologies and establishing a regulatory framework to support these innovations, mentioning the Markets in Crypto-Assets Regulation (MiCA) and the Digital Operational Resilience Act (DORA).
Croatia as part of the European capital markets strategy
Talking about the state of the domestic capital market, Žigman noted that Croatia must work on strengthening its financial market to better integrate into the European one. "The domestic capital market is faced with low liquidity and high trading concentration, but we can see positive potential through recent government bond issuances and increased investment interest," he said. He mentioned that a new national strategy for capital market development is being drafted, aiming to encourage domestic companies to take advantage of market-based financing, attract small investors, and boost market liquidity.
He also emphasised the importance of Croatia's membership in the OECD and participation in initiatives that will enable better integration into regional capital markets, further stimulating economic growth and the development of small and medium-sized enterprises.
At the end of his presentation, Žigman concluded that Europe is facing the challenge of a deep transformation of its capital markets. Integration, modernisation, and strengthening of the regulatory framework are key for making European capital markets more competitive. He called for further reforms to facilitate easier access to financing, especially for small and medium-sized enterprises, which are the backbone of economic growth.
Mr. Žigman's presentation is available here.
Photo: Vedran Benović
