90% of banks' retained earnings tied up in meeting increasing supervisory capital requirements from 2021 to 2024

90% of banks retained earnings tied up in meeting increasing supervisory capital requirements from 2021 to 2024

EBF STUDY

90% of banks’ retained earnings tied up in meeting increasing supervisory capital requirements from 2021 to 2024

Brussels, 5 December 2025 – In May 2025, the European Banking Federation and the Global Association of Risk Professionals (GARP) led a data collection effort to assess the impact of additional supervisory capital requirements on European banks beyond the minimum required by the Basel framework. 15 European banks representing 66% of the industry assets participated in the study, which covered the years 2021 to 2024. Results of the study showed that the aggregate required CET1 capital from supervisory discretion increased by EUR 102 billion between the years of 2021 and 2024, while the Basel baseline remained steady.

Against this background, the EBF has led a data collection effort to quantify and assess how much of banks’ retained earnings have been absorbed by the increasing capital requirements during the same period.

Results show that 90% of the capital generated by banks for further growth and innovation has been absorbed by the EUR 102 billion increase in capital requirements.

Over the last three years, the 15 banks sampled have generated approximately EUR 112 billion in retained earnings. Of these EUR 112 billion, EUR 102 billion have been used to meet increasing capital requirements, leaving only EUR 10 billion for further development of financing capacity.

In other words, over EUR 1.5 trillion[1] of lending capacity has been blocked by the rising supervisory capital requirements.

At a time when financing needs are projected to increase significantly as Europe aims to close the competitiveness gap with its main competitors, banks’ ability to develop further financing and therefore determine the availability of credit to the economy is crucial.

The EBF calls for policymakers to revert the trend of increasing gold-plating capital requirements beyond the Basel baseline, to ultimately make more efficient use of capital resources in the banking system.

[1] The ECB, in a March 20, 2020 press release, estimated that capital relief translates into additional financing by a multiplier of about 15x. ECB Press Release.

Read the full study here

For more information, please contact:

Kalina Pateva, Policy Adviser, Prudential Policy & Supervision – k.pateva@ebf.eu

Gonzalo Gasos, Senior Director, Prudential Policy & Supervision – g.gasos@ebf.eu

About the EBF:

The European Banking Federation is the voice of the European banking sector, bringing together national banking associations from across Europe. The EBF is committed to a thriving European economy that is underpinned by a stable, secure and inclusive financial ecosystem, and to a flourishing society where financing is available to fund the dreams of citizens, businesses and innovators everywhere.