Raising capital through primary markets
Companies, governments and other entities looking for funding can decide to raise capital by issuing securities, such as shares and bonds, and sell them to investors. When newly issued securities are distributed to investors, either publicly or privately, this is generally referred to as a primary issuance.
Public offers, and admission to trading on a regulated market, are generally subject to prospectus and disclosure requirements under EU rules (the Prospectus Regulation), recently streamlined by the EU Listing Act, which introduced lighter-touch prospectus formats for already-listed issuers and for SMEs.
One of the best-known examples of primary issuance is an initial public offering (IPO), through which a company (i.e., the issuer) offers shares to the public for the first time and has them admitted to trading on a regulated market, typically a stock exchange.
Primary markets therefore play a central role in connecting issuers seeking financing with investors looking for investment opportunities. Once issued, securities may subsequently be traded between investors on secondary markets, which provide liquidity and price formation, and help support the functioning of primary markets. Together, primary and secondary markets channel savings into productive investment and support the financing of the real economy.
The role of banks in Primary Markets
Banks play a central role in primary markets by helping companies, governments and other issuers raise capital. They advise issuers on structuring and pricing transactions, underwrite and place securities, often through firm commitment underwriting, buying and reselling securities and thereby committing their own capital and risk to ensure an issuance is completed, and connect issuers with a broad and diverse investor base. Larger transactions are typically distributed through a syndicate of banks led by one or more bookrunners, spreading placement risk and broadening distribution across investor types and geographies.
Banks support issuers throughout the capital-raising process, from initial public offerings (IPOs) and follow-on equity offerings to corporate and government bond issuances and private placements. In doing so, they help issuers select the most appropriate financing instruments, navigate market conditions and regulatory requirements such as prospectus and disclosure obligations, and access market-based finance. In sovereign debt markets, banks also act as primary dealers: bidding at government bond auctions, whether priced on a uniform-price or multiple-price (discriminatory) basis, and often committing, as a condition of that status, to make secondary markets in the bonds they help place.
Through these activities, banks facilitate the efficient allocation of capital, broaden access to funding and contribute to the effective functioning and resilience of EU primary markets.
EBF priorities
The EBF supports primary markets that are simpler simpler to access, more competitive and better integrated, giving companies, particularly SMEs, mid-caps and high growth businesses, a broader range of financing options alongside bank lending, while preserving strong investor protection and market integrity.
1. Listing Act implementation
Effective implementation of the EU Listing Act is a priority. The Act simplifies listing requirements and ongoing disclosure obligations, particularly for smaller and first-time issuers, and should reduce unnecessary administrative burdens while preserving investor protection, transparency and market integrity.
2. Simplification of the issuer's journey
Beyond the Listing Act itself, companies should be able to raise capital across the EU under rules that are interpreted, implemented and supervised consistently, rather than navigating inconsistent approaches across 27 national regimes. Transparency and market integrity are better served by clear, proportionate rules than by duplicative or disproportionate ones, at every stage of an issuer's journey, not only at the point of listing.
3. Innovation and digitalisation
Prospectuses, disclosures and investor communications should support digital processes that reduce the cost and complexity of accessing public markets. The EBF also supports the further development of DLT based issuance, building on the EU's DLT Pilot Regime. Wider use of DLT in issuance could improve efficiency and lower costs, provided it comes with the same safeguards, on investor protection, market integrity and operational resilience, that apply to traditional issuance.