Establishing viable capital markets

Report submitted by a Working Group established by the Committee on the Global Financial System. The Group was co-chaired by Viral V Acharya (Reserve Bank of India) and Li Bo (People's Bank of China).

CGFS Papers  |  No 62  | 
23 January 2019

CGFS Chair Philip Lowe, Governor of the Reserve Bank of Australia, explains the key findings and recommendations of the report Establishing viable capital markets. 

Capital markets provide an important channel of financing for the real economy, they help allocate risk, and they support economic growth and financial stability. Moreover, capital markets have played an important part in financing the recovery from the Great Financial Crisis (GFC), a reminder of their "spare tyre" role in the financial system. This report examines recent trends in capital market development and identifies the factors that foster the development of robust capital markets.

The report finds that large differences persist in the size of capital markets across advanced and emerging economies. Emerging-economy markets have been catching up with their more advanced peers, but the gap has not yet been closed.

The analysis highlights the importance of macroeconomic stability, market autonomy, strong legal frameworks and effective regulatory regimes in supporting market development. Better disclosure standards, investor diversity, internationalisation, and deep hedging and funding markets, as well as efficient and robust market infrastructures, also play a key role.

The report's recommendations across six broad areas outline practical ways to support the development of robust and efficient markets.

JEL Classification: D47, G10, G18, G20, G28, G38