Crossing two hurdles in one leap: how an EU savings product could boost returns and capital markets
27 June 2025
There is now an urgent need to channel retail savings into European capital markets in order to develop those markets and finance EU priorities. In this edition of the ECB Blog, we show that an EU savings standard could increase retail participation in the capital markets, benefiting savers, boosting investment in EU companies and supporting strategic priorities.[1]
There are over 50,000 retail investment funds in the EU, offering a vast array of opportunities and diversified investment options. Investment opportunities are abundant – the key, however, is finding the right products. Increased retail participation in capital markets has the potential to deliver higher returns to savers and cater to diverse risk appetites over long-term horizons. Channelling savings into capital markets would also help to finance the priorities of the EU.
One way to achieve this is by introducing a European savings standard – a standardised, EU-wide set of savings products with potential tax incentives for eligible products.[2] This blog explores the trade-offs faced by policymakers when it comes to designing such a standard and shows how certain selection criteria, for example related to investment costs, would affect the available landscape of investment products.[3]
However, looking at the investment products that are already available to savers in the EU, it’s plain to see that most of the assets held by low-cost funds, as measured by the total expense ratio (TER), have a global or US focus (Chart 1a). On the one hand, this highlights a crucial trade-off between low-cost products, higher returns and diversification for savers. On the other, it showcases an opportunity to align with European financing priorities. From the consumer’s perspective, ensuring that investments have a broad geographical scope can enhance returns and diversify risk. However, this approach may conflict with the goal of financing European priorities, especially when tax incentives are used to encourage investment in the EU.
The funds in our sample achieved an average annualised return of 6% over the past ten years (Chart 3), similar to the return on European stock indices such as the MSCI Europe. This is substantially higher than the interest rate on deposits, even those with a fixed term, where most savings are currently held. The foregone return is particularly significant when looking at global indexes.
By investing in capital markets over long periods, savers would benefit from significantly higher returns than they get by holding deposits. And by using tax incentives to shift even a small portion of savings into the selected funds in our sample, policymakers could attract more capital into the EU. Therefore, an EU savings standard would accomplish two things at once.
Savings initiative could boost EU capital market integration
Coordinated tax incentives at EU level could make an EU savings standard more attractive. They would also offer savers tangible financial benefits linked to European objectives and ensure a level playing field. This should go hand in hand with simplifying and streamlining the differences in national taxation procedures stemming from investing across borders. Importantly, to support Single Market integration, the initiative should seek to foster investments across Europe rather than in individual Member States.
Conclusion
A European savings standard could benefit both savers and companies by channelling a share of existing liquidity to the more productive part of the economy while also providing savers with competitive returns. But its design matters. Calibrating the selection criteria, coupled with tax incentives and dismantling barriers to a more integrated EU capital market will be key to achieving the dual goals of maximising returns and supporting EU objectives. Crucially, investors should continue to enjoy flexibility when choosing which products to invest in, as they will ultimately be the ones who shoulder the risk of investing in the capital markets.
2 A European savings and investment account would represent a new account where an investor would deposit money that they can invest in funds complying with certain criteria (e.g. investment mandate, deposit limit or withdrawal restrictions) and offering tax incentives. A European savings and investment label, on the other hand, would be applied to existing investment vehicles which comply with certain criteria and could offer tax benefits for the investor. A European savings and investment product would represent a type of investment vehicle, complying with certain criteria and offering tax benefits, and which would actively attract and invest contributions from savers. Our proposal is not committed to one particular form; the focus here is on the impact the proposal could have.ECB
— Guillermo Ruiz Zapatero (@ruiz_zapatero) June 28, 2025
Free markets are free channels to capital and funding. Forced chanelling of savings or any input to any "need" is contrary to "markets as discovery procedure" (Hayek) and articles 63 to 66 of the Treaty on the Functioning of the European Union on free movement of capital https://t.co/1CS5CCVGXs
Markets as a discovery procedure refers to the idea that market mechanisms are a crucial way for individuals and society to discover information about preferences and resources. This perspective suggests that they are processes that generate knowledge and coordinate activity
— Guillermo Ruiz Zapatero (@ruiz_zapatero) June 28, 2025
ANNEX I NOMENCLATURE OF THE CAPITAL MOVEMENTS REFERRED TO IN ARTICLE 1 OF THE DIRECTIVE In this Nomenclature, capital movements are classified according to the economic nature of the assets and liabilities they concern, denominated either in national currency or in foreign exchange. The capital movements listed in this Nomenclature are taken to cover:
— all the operations necessary for the purposes of capital movements: conclusion and performance of the transaction and related transfers. The transaction is generally between residents of different Member States although some capital movements are carried out by a single person for his own account (e.g. transfers of assets belonging to emigrants),
— operations carried out by any natural or legal person (1), including operations in respect of the assets or liabilities of Member States or of other public administrations and agencies, subject to the provisions of Article 68 (3) of the Treaty,
— access for the economic operator to all the financial techniques available on the market approached for the purpose of carrying out the operation in question. For example, the concept of acquisition of securities and other financial instruments covers not only spot transactions but also all the dealing techniques available: forward transactions, transactions carrying an option or warrant, swaps against other assets, etc. Similarly, the concept of operations in current and deposit accounts with financial institutions, includes not only the opening and placing of funds on accounts but also forward foreign exchange transactions, irrespective of whether these are intended to cover an exchange risk or to take an open foreign exchange position,
— operations to liquidate or assign assets built up, repatriation of the proceeds of liquidation thereof (1) or immediate use of such proceeds within the limits of Community obligations,
— operations to repay credits or loans.
This Nomenclature is not an exhaustive list for the notion of capital movements — whence a heading XIII — F. ‘Other capital movements — Miscellaneous’. It should not therefore be interpreted as restricting the scope of the principle of full liberalization of capital movements as referred to in Article 1 of the Directive.
I — DIRECT INVESTMENTS (1) 1. Establishment and extension of branches or new undertakings belonging solely to the person providing the capital, and the acquisition in full of existing undertakings. 2. Participation in new or existing undertaking with a view to establishing or maintaining lasting economic links. 3. Long-term loans with a view to establishing or maintaining lasting economic links. 4. Reinvestment of profits with a view to maintaining lasting economic links. A — Direct investments on national territory by non-residents (1) B — Direct investments abroad by residents (1)
II — INVESTMENTS IN REAL ESTATE (not included under I) (1) A — Investments in real estate on national territory by non-residents B — Investments in real estate abroad by residents
III — OPERATIONS IN SECURITIES NORMALLY DEALT IN ON THE CAPITAL MARKET (not included under I, IV and V) (a) Shares and other securities of a participating nature (1). (b) Bonds (1). A — Transactions in securities on the capital market 1. Acquisition by non-residents of domestic securities dealt in on a stock exchange (2). 2. Acquisition by residents of foreign securities dealt in on a stock exchange. 3. Acquisition by non-residents of domestic securities not dealt in on a stock exchange (2). 4. Aquisition by residents of foreign securities not dealt in on a stock exchange. B — Admission of securities to the capital market (2) (i) Introduction on a stock exchange (2). (ii) Issue and placing on a capital market (*). 1. Admission of domestic securities to a foreign capital market. 2. Administration of foreign securities to the domestic capital market.
IV — OPERATIONS IN UNITS OF COLLECTIVE INVESTMENT UNDERTAKINGS (2) (a) Units of undertakings for collective investment in securities normally dealt in on the capital market (shares, other equities and bonds). (b) Units of undertakings for collective investment in securities or instruments normally dealt in on the money market. (c) Units of undertakings for collective investment in other assets. A — Transactions in units of collective investment undertakings 1. Acquisition by non-residents of units of national undertakings dealt in on a stock exchange. 2. Acquisition by residents of units of foreign undertakings dealt in on a stock exchange. 3. Acquisition by non-residents of units of national undertakings not dealt in on a stock exchange. 4. Acquisition by residents of units of foreign undertakings not dealt in on a stock exchange. B — Administration of units of collective investment undertakings to the capital market (i) Introduction on a stock exchange. (ii) Issue and placing on a capital market. 1. Admission of units of national collective investment undertakings to a foreign capital market. 2. Admission of units of foreign collective investment undertakings to the domestic capital market.
V — OPERATIONS IN SECURITIES AND OTHER INSTRUMENTS NORMALLY DEALT IN ON THE MONEY MARKET (2) A — Transactions in securities and other instruments on the money market 1. Acquisition by non-residents of domestic money market securities and instruments. 2. Acquisition by residents of foreign money market securities and instruments. B — Admission of securities and other instruments to the money market (i) Introduction on a recognized money market (*). (ii) Issue and placing on a recognized money market. 1. Admission of domestic securities and instruments to a foreign money market. 2. Admission of foreign securities and instruments to the domestic money market.
VI — OPERATIONS IN CURRENT AND DEPOSIT ACCOUNTS WITH FINANCIAL INSTITUTIONS (3) A — Operations carried out by non-residents with domestic financial institutions B — Operations carried out by residents with foreign financial institutions
VII — CREDITS RELATED TO COMMERCIAL TRANSACTIONS OR TO THE PROVISION OF SERVICES IN WHICH A RESIDENT IS PARTICIPATING (3) 1. Short-term (less than one year). 2. Medium-term (from one to five years). 3. Long-term (five years or more). A — Credits granted by non-residents to residents B — Credits granted by residents to non-residents
VIII — FINANCIAL LOANS AND CREDITS (not included under I, VII and XI) (3) 1. Short-term (less than one year). 2. Medium-term (from one to five years). 3. Long-term (five years or more). A — Loans and credits granted by non-residents to residents B — Loans and credits granted by residents to non-residents
IX — SURETIES, OTHER GUARANTEES AND RIGHTS OF PLEDGE A — Granted by non-residents to residents B — Granted by residents to non-residents
X — TRANSFERS IN PERFORMANCE OF INSURANCE CONTRACTS A — Premiums and payments in respect of life assurance 1. Contracts concluded between domestic life assurance companies and non-residents. 2. Contracts concluded between foreign life assurance companies and residents. B — Premiums and payments in respect of credit insurance 1. Contracts concluded between domestic credit insurance companies and non-residents. 2. Contracts concluded between foreign credit insurance companies and residents. C — Other transfers of capital in respect of insurance contracts
XI — PERSONAL CAPITAL MOVEMENTS A — Loans B — Gifts and endowments C — Dowries D — Inheritances and legacies E — Settlement of debts by immigrants in their previous country of residence F — Transfers of assets constituted by residents, in the event of emigration, at the time of their installation or during their period of stay abroad G — Transfers, during their period of stay, of immigrants' savings to their previous country of residence
XII — PHYSICAL IMPORT AND EXPORT OF FINANCIAL ASSETS A — Securities B — Means of payment of every kind XIII — OTHER CAPITAL MOVEMENTS A — Death duties B — Damages (where these can be considered as capital) C — Refunds in the case of cancellation of contracts and refunds of uncalled-for payments (where these can be considered as capital) D — Authors' royalties: patents, designs, trade marks and inventions (assignments and transfers arising out of such assignments) E — Transfers of the monies required for the provision of services (not included under VI) F —Miscellaneous
— Guillermo Ruiz Zapatero (@ruiz_zapatero) June 30, 2025
— Guillermo Ruiz Zapatero (@ruiz_zapatero) June 30, 2025
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