Citi Institute has published a new report that puts the spotlight on post-trade challenges and fragmentation in the EU. Titled, “Reimagining European capital markets: from fragmentation to harmonisation”, it highlights the key benefits of a unified European capital market.
At the centre of the paper is a recent client survey conducted by Citi Investor Services. It reveals some key takeaways:
• 63% of respondents believe that there are “significant gaps” in regulation, policy, taxation, and operational processes that need to be addressed.
• 50% of the respondents believe that the high number of financial market infrastructures (FMIs) in the EU are a key factor causing fragmentation.
• 43% believe that it is legal and regulatory inconsistencies that are driving fragmentation.
• 40% also cite high and opaque cost structures as a contributor to fragmentation. Average settlement costs are 30 to 300% higher and safekeeping costs 160 to 500% higher in the EU than in the US.
• 36% of respondents agree that tokenisation could boost efficiency and play a role in harmonisation.
• 64% of respondents estimate that harmonisation efforts will take about a decade to show results
A price to be paid
Citing a report on equity primary markets and trading by the Association for Financial Markets in Europe (AFME) and IPO market statistics for 2025 by Renaissance Capital, both published in December last year, Citi Institute states that fragmentation has contributed to a capital formation gap in the EU. Between 2020 and 2025, the value of IPOs in the EU was 0.6% of GDP – compared to 2.1% in the US.
Another study by the Centre for Economic Policy Research published in September 2025 estimated that a unified European capital market is likely to add €150 billion in annual investments and positively impact GDP by 1.5% over 10 years.
Get in action
To conclude, the paper proposes an action plan to address Europe’s fragmentation. It suggests simplifying the market infrastructure of the region by consolidating CSDs and standardising fee structures. A single pan-European regulator should be established to enforce rules. T+1 will be a key driver of efficiency, encouraging the development of next-generation technology, such as AI, DLT, and tokenisation.
The approach taken should be geographically inclusive and include the UK and Switzerland. Unification with these markets that are not within the EU will involve removing unnecessary due diligence requirements, harmonising tax laws, and fostering a more competitive and liquid environment.
