EBF BOARD

Accelerating simplification and removing hurdles to strengthen Europe’s competitiveness

Board members emphasised that Europe is at a decisive moment. The analyses of Mario Draghi and Enrico Letta have made the need for reforms  clear, yet progress remains too slow. Europe’s investment needs, estimated at up to €1.2 trillion annually, require the contribution of the EU financial system mobilising capital and financial resources at full capacity. However, banks continue to operate within a highly complex and fragmented regulatory and supervisory landscape that constrains unnecessarily their capacity to fuel the EU competitiveness reforms.

EBF President Slawomir Krupa stated: “While the European Commission’s planned competitiveness report on the banking sector (expected in the course of 2026) will provide valuable insights, the urgency of the situation to power up Europe’s economy requires faster and more decisive action. Europe cannot afford to fall further behind, while other jurisdictions move swiftly to simplify their regulatory and supervisory frameworks in support of growth and competitiveness, without compromising on the safety and soundness of the financial system”.

Indeed, according to recent studies, the U.S. is implementing reforms that could release up to 14% of core equity capital, unlocking approximately $2.6 trillion in lending and investment capacity. The UK is also expected to follow with reforms enabling significantly more lending capacity for the economy.

Against this background, the Board reiterated the importance of the EBF’s work to support regulatory and supervisory simplification and efficiency for EU competitiveness, including the Simply Competitive report. The report sets out concrete proposals to streamline existing rules, eliminate unnecessary overlaps and ensure a more proportionate and predictable framework for banks across Europe, while preserving key safeguards for financial stability. It has been widely shared with policymakers and serves as a basis for the EBF’s engagement with the European Commission as it advances its competitiveness agenda.

A key point highlighted during the discussion was the growing weight of supervisory capital requirements. Recent data collected by the EBF and the Global Association of Risk Professionals (GARP) show that, between 2021 and 2024, the additional capital required due to supervisory discretion increased by €102 billion across a sample of 15 major European banks, while the Basel baseline remained unchanged. This group represents around two-thirds of the sector’s assets.

During the same period, these 15 banks generated €112 billion in net retained earnings. An EBF supplemental study shows that 90% of this capital was absorbed by the increase in supervisory requirements, leaving only around €10 billion available to support additional financing. This represents more than €1.5 trillion in potential lending capacity prevented from reaching the European economy.

As Europe seeks to close its competitiveness gap and finance the digital, green, security and defense objectives, the Board stressed the need to take decisive action and release idle capital currently blocked by the complex and overburdened EU regulatory and supervisory framework.

In this context, the Board also emphasised the vital importance of adopting an ambitious approach to securitisation, as highlighted in the Draghi report. Securitisation remains a key yet significantly underused tool in Europe, with annual issuance levels ten times lower than in the US. Revising the securitisation framework in an ambitious and appropriate manner would enable banks to provide additional lending capacity and transfer risk to investors, complementing the overly slow progress of the Capital Markets Union. Europe cannot afford to waste this window of opportunity now presented by the review of the securitisation framework.

Digital euro and the future of payments in Europe

The Board also reviewed recent developments on the digital euro, including progress in legislative negotiations and the ECB’s move to the next phase of the project. Members noted that Europe must develop a clear and coherent vision for the future of payments that fosters innovation, resilience and strategic autonomy.

Recent debates in the European Parliament suggest beginning with an offline digital euro, while the online version would only be introduced if no pan-European sovereign retail payment solution is available. Key topics such as holding limits, distribution, compensation and privacy safeguards remain under discussion at Council level.

According to the ECB, technical readiness could allow for a pilot in 2027 and potential first issuance in 2029, if legislation is adopted in the course of 2026. Further work is ongoing in the Rulebook Development Group and the Euro Retail Payments Board and on cost assessments for the banking sector.

Board members reiterated key principles that should guide Europe’s approach. Any new framework should leverage, complement and build on existing and rapidly developing private sector payment solutions. Members also stressed the importance of ensuring that implementation costs, compensation models and holding limits are thoroughly discussed and set in a way that does not erode banks’ competitiveness and innovation potential or reduce their financing capacity. Close cooperation between the public and private sectors is essential for Europe’s payment sovereignty as the future landscape should cater for all forms of innovative payment options for consumers. Developments in stablecoins and deposit tokens, for instance, should be given specific attention in this regard.

A shared direction for Europe’s financial future

The EBF Board reiterated the determination of European banks to compete, innovate and safeguard consumers’ trust within the volatile global environment. At the same time, they agreed that banks can only contribute to Europe’s competitiveness, if the regulatory environment becomes simpler, more coherent and more proportionate, allowing also for a payment ecosystem that stimulates innovation while ensuring stability and security. The EBF will continue to work closely with European institutions and public authorities to ensure that the financial sector remains resilient and able to support Europe’s long-term priorities.

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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.