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The Association for Financial Markets in Europe (AFME), in collaboration with eleven other European and international organisations, has today published the eighth edition of the “Capital Markets Union – Key Performance Indicators” report, which assess the EU’s progress in deepening its capital markets as measured by a set of key metrics.
The report also provides comparisons with other global competitors and examines dynamics at the level of individual EU Member States. The nine indicators are organised into four categories intended to evaluate progress as measured by key characteristics for efficient, deep, and interconnected capital markets.

Among the key findings of the 2025 report on European capital markets’ performance:

 

Record bond issuance contrasts with subdued IPO activity. Market-based finance for EU corporates rose slightly to 13% of total financing in 2025 (12% in 2024), driven by record bond issuance due to significantly lower debt costs as spreads reached low levels not seen since the pandemic. In contrast, equity financing continued to decline, as IPO volumes fell by 23% in stark contrast with the US, China, Japan, and Australia where IPO activity has increased 20-60% over the year. 

This weakness is striking given the various supportive fundamentals: EU equity valuations above historic averages while market volatility has been broadly stable. Yet, European IPO activity has fallen to another multi-year low while Klarna, one of Europe’s most prominent European growth company, opted to list outside the EU.

In Europe, an increasing number of companies seem to be opting for an alternative listing process to traditional IPOs in recent years. According to FESE2, in the first half of 2025, there were 33 IPOs of European domestic companies, representing 49% of new domestic listings, compared to 64% in 2022 and 79% in 2020.

The persistent weakness of the IPO market raises concern, considering its crucial role for price discovery, in providing an efficient source of long-term capital, and in offering founders and investors an exit opportunity.

Against this background, a new funding mix is emerging with private markets playing an increasingly significant role. Private sources of funding have gained greater participation in the corporate funding mix in the EU and globally. While in 2014 private markets (private credit, private equity, business angels, and equity crowdfunding) represented 8% of total new gross funding from capital markets including public and private sources (with the remaining 92% sourced from public markets including bonds and public equity), this has increased to 20% of the total in 2024.

Notably, while the composition of finance sources has shifted, the overall private and public funding size relative to GDP has not expanded over the past decade. This contrasts with the United States, where not only the mix has shifted but also the size of capital markets has grown. Total funding in the US has increased from 6% of GDP in 2014 to 8% in 2024, whereas in the EU it has stalled at an unambitious 3% of GDP.

Unicorns stay private factoring the new opportunities resulting from the new funding mix. Unicorn companies (market valuation above $1bn) are increasingly staying private, supported by deepening pools of late-stage private capital. Over 70% of the 2016 EU Unicorns completed IPOs within four years, while just 18% remained private. In contrast, by 2025, 90% of the 2021 EU Unicorns continued private, with only 5% having undergone an IPO.

In the report we discuss further what these developments may mean for policymaking, particularly regarding the "funding escalator" (how companies’ sources of funding evolve alongside company stage of growth) first proposed in the 2014 CMU Action Plan. Private markets are now taking a larger participation in the funding escalator than previously considered and beyond the seed and mid-cap level, while technologies such as tokenisation are facilitating the transaction of illiquid vehicles blurring even further the lines between liquid public markets and illiquid private markets.

Promoting retail investment improves market liquidity. We undertake an ad-hoc analysis on the impact on equity market liquidity of promoting retail savings through market-based instruments (equity shares, funds, pensions, insurance). We ask the question, on whether pools of capital are the main factor to develop market liquidity. Our estimates show that increasing per person retail savings in capital markets products by 10% improves market liquidity by reducing c6% the value of bid-ask spreads of the local stock exchange, highlighting how crucial are demand-based factors in developing market liquidity.

An important challenge in this context is discussed in a box regarding the proposal for investment accounts, and the ongoing debate about striking the right balance between encouraing retail savings and channeling funding into EU-based corporates. Our estimates show that limiting investment favouring local companies can increase the amount of investment into the EU, at the expense of reducing annual returns for retail investors of between 1-2% per year.

The trajectory of the household savings indicator also shows that EU household financial assets remained stable at 94% of EU GDP in 2025. Household equity ownership of shares rose 4% in the first part of 2025 due to higher EU equity valuations of 15-20% during the year.

European Long-Term Investment Funds (ELTIFs) continue to expand, reflecting the success of the ELTIF 2.0 reform framework. The ELTIF market experienced record growth in 2025, with 183 funds marketed (from 118 in 2024) and AuM reaching €20.5 billion. The market has a large potential to continue to grow as US-equivalent products such as the Business Development Companies (BDCs) have a considerably larger amount of AuM totalling $414 billion.

There are, however, differences across jurisdiction in the average size of funds. The average EU ELTIF fund size is €160 million versus €2.5 billion for US BDCs and €360 million for UK Long-Term Asset Funds (LTAFs). ELTIFs are marketed more frequently to the retail market than LTAFs, which likely explains the considerable difference in size compared to LTAFs. Such a difference nevertheless raises the question whether cost efficiencies from operating at a larger scale within the EU single market (i.e. economies of scale) are being fully realised and if consolidation will occur as the EU market matures.

Accelerated adoption of financial technology in capital markets. In this context, the EU and US are shaping different fronts of digital innovation ecosystem.

The EU and Switzerland dominate DLT-based bond issuance with over 50% of global volumes in 2024–2025. However, the use of tokenisation in capital markets is primarily driven by the US, which hosts most tokenised funds and allocates 90% of tokenised assets to US Treasuries, while also leading in tokenised ABS and private credit. The US also dominates the $257 bn stablecoin market, with USD-backed tokens representing 99.8% of global supply, and leads DLT-based repo activity through platforms like Broadridge and JP Morgan’s Kinexys. In contrast, Europe’s role in tokenisation and stablecoins remains marginal despite its leadership in DLT bonds.

Developments are also taking place in the transfer of loan instruments. The wider use of Significant Risk Transfer (SRT), a financial instrument pioneered in Europe, is facilitating more efficient risk sharing and capital relief for banks.

EU loan transfer activity slowed in 2025, driven by weaker true sale securitisation issuance3. Securitised product issuance reached €88.4 billion in H1 2025 (1.3% of EU outstanding loans), below the US (7.5%), Australia (2%) and the UK (1.8%). While true sale EU securitisation has stagnated since the 2017–2021 peak, the inclusion of SRT boosts the indicator as SRT now accounts for 8% EU securitisation volumes4, with that proportion almost tripling since 2020, lifting the Loan Transfer Indicator to 1.7%. The EU leads globally in SRT issuance, contrasting with its lag in true-sale securitisation, while other regions such as Japan, Australia, and China remain absent from SRT markets.

Reduced participation of ESG in bond financing. In 2025H1, EU ESG bond issuance increased 14% accounting for 10.7% of total EU bond issuance. While ESG issuance is on track to exceed the 2024 volume, its share of total bond issuance declined compared to last year, as non-ESG bond issuance expanded at a faster pace.

Adoption of the EU Green Bond Standard (EuGB) in its first year of operation appeared to be modest, with only nine bonds issued in the first half of 2025 totaling €9 billion (6.4% of European green bond issuance). Despite strong demand, evidenced by oversubscriptions such as 13.4x for the largest EuGB, there is little evidence of pricing benefits (or greenium) from the label so far.

 

Intra-EU integration improved driven by an increase in intra-EU holdings of portfolio assets and a marginal increase in intra-EU M&A. However, cross-border equity public equity issuance remains at 6% of the EU’s equity capital raising occurring outside the companies’ home exchange, compared to a stable 10-14% observed two decades ago.

 

Market integration with the rest of the world improved, on the back by strong inflows into exchange-traded funds (ETFs) which reached record levels in the first half of 2025.