A competitiveness and growth regulatory mindset for Europe’s banks
16 May 2025, Warsaw – As global dynamics shi1, Europe must secure growth, prosperity, and safety. The EU needs an €800 billion annual investment gap and another €800 billion by 2030 for security and defense. The European Commission’s CompeFFveness Compass focuses on three prioriFes: boosFng innovaFon, acceleraFng decarbonisaFon and compeFFveness, and reducing strategic dependencies. Europe’s banks are crucial to this endeavour. By mobilising capital and offering innovaFve and secure soluFons to ciFzens and businesses, they can help meet the conFnent’s most urgent needs. A compeFFve Europe needs a compeFFve banking sector. At its meeFng on 16 May, the European Banking FederaFon (EBF) Board discussed the main prioriFes to unlock this potenFal.
EBF President Slawomir Krupa stated: “Bold and decisive ac/on is essen/al to rebuild Europe’s economic leadership and achieve results. Delivering real change in these areas demands a fundamental shi= in mindset—away from a too defensive posture, based upon the flawed assump/on that extreme resilience equals health and strength, towards a more proac/ve approach that embraces growth, appropriate risk-taking and investment as necessary ingredients for compe//veness, growth, and prosperity. Europe’s banking sector remains at the centre of the EU’s growth strategy and needs to be supported by a regulatory and supervisory framework that empowers it to finance Europe's vital needs: innova/on, energy, defence, security, sustainability and strategic autonomy.”
Unlocking capital for growth and security
To unleash growth potenFal, Europe needs to unlock bank capital as a fundamental resource for supporFng its economy and businesses. Now is the Fme to put that capital to work and ensure that the regulatory framework and supervisory practice move beyond a sole focus on extreme resilience, toward one that empowers the financial sector to act as a true catalyst for growth. Since 2008, the conFnuous efforts of the banks and EU’s financial regulatory architecture have ensured that European banks are resilient and well-capitalised. However, they are also subject to very high capital requirements and operate under the constant perspecFve of further increases, forcing overcauFousness, because the European banking system is weighed down by naFonal discreFons, capital add-ons and gold-plaFng over internaFonal standards. Taking into account the already proven resilience and without quesFoning the fundamental objecFve of financial stability, it is Fme to reassess the capital requirements faced by European banks and notably the mulFple layers of supervisory capital add-ons imposed at the EU level beyond the Basel minimum requirements. This assessment should also take into account internaFonal developments, where some major jurisdicFons may not fully implement the Basel III endgame. This raises a criFcal issue of compeFFveness for European banks, whose market share has already been declining compared to their U.S. counterparts, including in key areas such as wholesale and capital markets in Europe. It also presents the quesFon of how much capital is being unnecessarily locked out of the financial system — capital that could otherwise be more effecFvely used to support lending to households and businesses. For the same reason—unlocking capital—reviving the securiFsaFon market in Europe should be a key priority too, as it would increase banks’ lending capacity. It would also provide professional investors with a broader range of secure, diversified investment opportuniFes and access to risk management tools.
Europe’s banking sector: A strategic sector
As Europe shi1s from an over-focus on risk avoidance to an agenda of growth, it must recognise its banking sector as a strategic enabler. As proposed in the Savings and Investments Union (SIU), the EBF supports the development of a dedicated report to assess the compeFFveness of the European banking sector and guide future policy, as well as tangible measures to foster it, as soon as possible in 2026.
Simplifying & adjus3ng the regulatory and supervisory framework for growth
Banks’ ability to serve efficiently future needs faces a complex and fragmented supervisory and regulatory framework, with proliferaFon of rules, standards, guidelines, supervisory expectaFons (level 2 and level 3), and naFonal discreFons, in all areas of banking acFvity, including rules governing retail banking, digital finance, and cyber resilience. Between 2019 and 2024, the EU issued approximately 13,000 new regulaFons, and EU’s financial rulebook now exceeds 15,000 pages of direcFves and standards. It is therefore essenFal to examine what can be simplified and streamlined to enhance regulatory and supervisory efficiency going forward. Regulatory complexity is affecFng also Europe’s sustainable and digital transiFons, o1en coupled by insufficient analysis of costs, risks, and benefits, and inadequate consideraFon of unintended consequences that could disadvantage EU banks. The European Commission’s efforts to align regulaFon with both compeFFveness and sustainability objecFves are welcome and need to extend to digitalisaFon as well. The next step must be to reduce regulatory complexity and enhance the compeFFveness of Europe’s industry and banking system, fostering the financing of businesses and beaer servicing of consumers. The first omnibus is a welcome first step in the right direcFon and is fit for the current challenging and rapidly changing environment.
New ideas must pass the competitiveness test
A rigorous mindset should apply, even more urgently, to new proposals with the potenFal to heavily impact the financial services landscape. The legislaFve proposals for financial data sharing and digital euro, currently under review by the co-legislators, are cases in point. Regarding FiDA: despite acknowledging the innovaFon potenFal of cross-sectoral data sharing, banks have serious concerns about the proposal’s cost implicaFons, divergence of resources without proven market demand, broad scope and unrealisFc Fmelines, and unclear roles for non-EU actors. These should be addressed with robust provisions and a bold rethinking process: the ability of European banks to innovate and compete needs to be the filter for scruFny within a changed (geo)poliFcal context, and withdrawal should remain an opFon if this scruFny points to such result. Regarding the digital euro: ensuring sovereignty in European payments is a highly strategic objecFve clearly shared by banks, central banks and authoriFes alike. Europe needs to get there fast and in the most cost-efficient way, and all opFons must be explored to that end. This includes a real public-private partnership in an ecosystem that makes room for and best use of all available and developing European-wide soluFons, including the infrastructure that the industry has in place already.