€37 trillion sits in European bank accounts, why isn't it reaching the economy?

An estimated €37 trillion sits in EU household bank accounts and low-yield savings, much of which fails to support business financing and economic growth. The European Securities and Markets Authority (ESMA) points to fragmented capital markets, weak investment culture, and limited financial literacy as key reasons.

An estimated €37 trillion sits in EU household bank accounts and low-yield savings-a sum that could theoretically fuel economic growth across the entire continent, yet much of it remains untapped.

Capital markets are fragmented

According to the European Securities and Markets Authority (ESMA), the main cause of the problem is the fragmentation of EU capital markets. Unlike the US, which has a single, deep capital market, the EU's 27 member states each have their own regulations, market structures, and investment habits. This means that for a small investor, cross-border investment is difficult and costly.

ESMA also points to weak investment culture: most Europeans prefer to keep savings in bank accounts rather than invest them in stocks, funds, or other assets with growth potential. This behaviour is partly linked to limited financial literacy-many people simply don't know how to start investing or what it means.

Companies are starved of capital

The consequences are economically significant. European companies, especially small and medium-sized enterprises, rely heavily on bank loans because raising capital from capital markets is difficult. This makes the economy vulnerable: when banks tighten lending, companies' investment capacity also shrinks.

The US is different: there, a larger share of business growth is financed through capital markets. Europe's gap with the US in this regard has actually widened over the years, which is one reason why EU productivity growth has slowed.

The promise of a capital markets union

The EU has spent years trying to change the situation through the so-called capital markets union, but success has been modest. The goal is to create a unified investment space where money flows more freely across borders to enterprises and projects that need it most. Steps taken so far have included regulatory simplifications and efforts to reduce barriers to cross-border investment, but aligning member states' interests has proven difficult.

Improving financial literacy is also on the agenda: if Europeans better understood the principles of investment, some of that €37 trillion could start flowing through channels that energise the economy.