LONDON: The European Union stepped up efforts on Monday to create a more unified and cheaper capital market by next year when it faces the loss of Britain, the bloc’s biggest financial centre.

The EU’s executive European Commission set out its latest plans for a “capital markets union” (CMU), a project initially focused on reducing heavy reliance of company funding on bank loans, but now made more pressing by Brexit.

“By the time Brexit happens, the preconditions for a true single market for capital need to be in place,” European Commission Vice President Valdis Dombrovskis told a news conference.

It is critical that EU states and the European Parliament get all measures “past the finishing line” ahead of elections for the EU assembly next year, Dombrovksis said.

Many continental European companies and listed funds use banks and asset managers in London. Britain is set to leave the EU in March 2019 and the future relationship between its giant financial services industry and the EU remains unclear.

The latest EU proposals include common rules for the covered bond market, a 2.1 trillion euro (Dh9.50 trillion; $2.6 trillion) sector whose funding role in countries including Germany and Denmark the bloc wants replicated more broadly.

The EU executive has now proposed 12 measures to create a CMU, but only three have been adopted, prompting one senior EU lawmaker to predict the project could flounder.

The covered bond market, where debt is issued on the back of a ring-fenced pool of high quality home loans and public debt, is fragmented along national lines.

The four largest markets account for about two-thirds of the EU market, and in some member states there is no covered bond market at all. The commission says a more unified, pan-EU approach would save EU borrowers an estimated 1.5 billion euros to 1.9 billion euros annually.

The EU proposals set out a common definition for covered bonds and their features, spell out who supervises them, and introduce rules for a European covered bond “label” to reassure investors.

Brussels says the proposed measures on funds distribution should save up to 440 million euros annually in costs for existing cross-border distribution.

“We want a fund manager based in Milan to easily offer funds in Riga without compromising investor protection,” Dombrovskis said.

But Invest Europe, which represents the private equity and venture capital sector, said the proposals could make it harder to raise cross-border capital.

“While we appreciate the commission’s intentions to improve the marketing passports, its proposed amendments preventing fund managers from sharing draft marketing materials with investors would impede their ability to negotiate a deal,” Invest Europe CEO Michael Collins said.

—Reuters