ECB’s Kocher: Monetary Policy Transmission, Growth in CESEE Need Well-Functioning Capital Markets

21 November 2025

By David Barwick – VIENNA (Econostream) – European Central Bank Governing Council member Martin Kocher on Friday said deeper and more liquid capital markets have become increasingly important for monetary policy transmission and for supporting investment and growth, including in Central, Eastern and Southeastern Europe (CESEE).

Kocher, who heads the Oesterreichische Nationalbank, said some monetary policy tools “target capital markets directly”, making their smooth functioning essential for policy effectiveness. Capital markets should be seen as a complement to Europe’s bank-based system rather than a substitute, he added.

He cautioned that recent global shocks underscored the need for European countries to “first, stand together, second, reduce dependencies, and third, leverage growth potentials within the Single Market”. More integrated capital markets would improve cross-border risk sharing and help provide the scale of private investment needed for the green and digital transitions, he said.

Kocher argued that capital markets can broaden financing options for firms, particularly start-ups and companies seeking to scale up, while offering households alternatives to bank deposits. A financial system resting on both banks and markets would be “a portfolio that allows better diversification and better sharing of risks”, he said.

He noted recent EU progress on market infrastructure and transparency, including instant payments without extra charges and the move to shorten settlement times to T+1 by 2027. The European Single Access Point for company and product information will open from mid-2027, he added.

Further initiatives remain underway under the European Commission’s rebranded Savings and Investments Union, including efforts to revive securitisation and improve financial literacy, he said. Securitisation can free bank balance sheets for new lending but requires careful calibration to avoid past excesses, he said.

Kocher highlighted growing regional cooperation, pointing to a memorandum of understanding among eight CESEE countries to improve liquidity, align rules and boost visibility of their markets. Such bottom-up efforts can complement EU-level initiatives, he said.

Despite some progress, Kocher said the EU’s role in global capital markets has not kept pace with its economic weight. Households still hold more than €11 trillion in cash and deposits, and venture capital levels remain far below those in the United States.

He said CESEE capital markets show low issuance of corporate debt securities and heavy reliance on non-resident investors, underscoring the need for development and integration.

Kocher concluded that deeper, more liquid and less fragmented capital markets are “a prerequisite for creating a sustainable, decarbonized and productive European economy” and said the CESEE region must be included in that project “as soon as possible”.