Norway’s Government Pension Fund Global, the world’s largest sovereign wealth fund with about $1.9 trillion in assets, is calling on the European Union to overhaul its capital markets with unified rules, taxes, insolvency processes, and supervision. As Europe’s biggest institutional investor—owning roughly 2.5 percent of every listed company in the EU—the fund warns ongoing fragmentation risks European firms listing in the US, further weakening regional investment opportunities .

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Fragmented Rules, Waning Influence

Over the past decade, the fund’s allocation to European equities dropped from 26 percent to 15 percent. Executives attribute the decline to inconsistent securities laws, varying insolvency regimes, and complex tax systems across member states, all of which hinder cross-border investment .

Malin Norberg, the fund’s chief of market strategies, told the Financial Times: “A well-functioning market in Europe is very important to us... there’s a sense of urgency right now among policymakers. We feel it too.” 

Recommendations for Reform

In response to the European Commission’s consultation on the Capital Markets Union (CMU), the fund suggests:

  • Harmonised withholding tax policies

  • Unified securities and insolvency laws

  • Streamlined debt issuance

  • A single EU-level supervisory authority to better handle trading infrastructure and cross-border securities issues 

US Listing Preference

The trend of European firms listing abroad is growing—global companies like Spotify, Klarna, Arm Holdings, Linde, and CRH have either listed in the US or are planning to do so . Fund leaders warn that without swift reforms, talent and capital will continue flowing to US markets over European exchanges.

A Wider Push for Capital-Market Integration

These demands overlap with the EU’s revived efforts to complete its CMU. The European Commission’s current plan proposes tax incentives, stronger centralized regulation, and the reduction of cross-border investment barriers—all aimed at unlocking the estimated €11.6 trillion in untapped household savings .

Economic Consequences of Fragmentation

Europe’s balkanised capital markets make it harder and more expensive for companies—especially SMEs and start-ups—to raise money. Universities and policymakers say unified rules could spur both innovation and competitiveness

For investors, fragmentation results in higher costs and reduced liquidity. The fund argues these structural inefficiencies have made U.S. markets far more appealing to large European firms and foreign capital.

Next Steps for Policy

  • Norway’s oil fund will submit its feedback to the Commission consultation this week

  • The EU may consider proposals for a unified tax system and a streamlined supervisory process under ESMA

  • Progress on the CMU could determine whether Europe can compete with U.S. and Asian capital markets for global investment 

Dource: Source: Reuters – Norway’s $1.9 tn Oil Fund Urges EU to Create a Single Capital-Markets Regulator