THE EBF BOARD HIGHLIGHTS

27 November 2024

European banks: Financing a competitive and thriving Europe

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The European banking sector has shown resilience and contributed to financial stability throughout the economically tumultuous period of the last five years. The future growth outlook remains clouded by uncertainty about economic policies and the geopolitical landscape, as outlined by the European Central Bank (ECB). In this legislative term, newly elected policymakers must take decisive action to unleash crucial bank investment and financing needed spur sustainable economic growth and reinforce Europe’s global standing. To deliver on this, the EU must take on board the recommendations of Mario Draghi and Enrico Letta and work to urgently address the complexity and fragmentation in the regulatory and supervisory framework for financial services. Meeting on 27 November, the European Banking Federation’s Board (EBF) called for a strategic, long-term approach to ensuring the international competitiveness and resilience of the European banking sector which is at the foundation of Europe’s competitiveness and ability to cope with digital and social and environmental challenges.

EBF President Christian Sewing said:

“In the next five years, Europe faces a choice: “walk the talk” on growth and competitiveness or see the EU’s role on the global stage decline further. Accelerating innovation, reducing energy prices, boosting defense, and reducing dependencies, all hinge on Europe’s ability to deliver financing and investment for its people and businesses. While strengthening and unifying Europe’s capital markets should remain a priority, European banks are generally well positioned to support the transformation of European corporates and SMEs, given the sector’s progress on stability and profitability in recent years. To fully harness this potential, however, the right regulatory parameters need to be set. We believe that evolving the existing framework is necessary foster growth in Europe while further enhancing financial stability, as the sector’s resilience is closely tied to its long-term profitability. It is essential for European regulators to monitor global trends in regulation and ensure a level playing field for Europe’s banks, especially when compared to the US. Europe also should make sure that it regularly reviews EU regulation to ensure it is aligned with the global environment  and applies the existing framework in a reliable and pragmatic manner.”

Unlocking funding and investments for sustainable growth

To boost growth, finance its transition needs and secure its future prosperity, Europe must unlock new private funding sources. Mario Draghi called for an additional €800 billion investment a year to close the productivity gap and stressed the importance of increasing both the financing capacity of the banking sector and leapfrogging EU capital markets to a new level of depth and integration. While game-changing reforms require time, short-term measures like securitisation can advance both objectives by providing a key mechanism for growing and integrating capital markets with corporate debt financing. Further integration of the banking markets through completing an effective Banking Union and diversifying the funding sources will also be crucial to meet the investment gap. During her confirmation hearings, the European Commissioner Maria Luís Albuquerque emphasized her commitment to advancing the Savings and Investment Union (SIU). This will require coordinated efforts, political will, and buy-in from all Member States.

Enhancing efficiency of the prudential and supervision framework

To boost its competitiveness in the global arena, Europe needs a regulatory environment that supports investment while keeping the level of resilience achieved through the financial services sector reform since the 2008 financial crisis. Reducing the complexity of the current framework will be crucial in achieving this and Commissioner-designate Valdis Dombrovskis for the Economy and Productivity, Implementation and Simplification portfolio is best placed to deliver on this objective. It is also important to closely monitor the developments in the international arena and take the right steps to ensure that the European banks can remain competitive. This includes reversing the significant gold-plating of EU banking regulations over international standards, scrutinising level 2 standards and supervisory guidelines that exceed the level 1 mandates and securing a level playing field with other jurisdictions.

Digital finance and a cyber resilient banking sector key for Europe’s strategic autonomy

Boosting innovation and digital operational resilience of the European payment and broader financial ecosystem is closely linked to European competitiveness and strategic autonomy, particularly in the context of economic resilience, geopolitical and technological shifts. Ongoing payments and data economy initiatives by the public authorities, particularly the digital euro and the financial data access regulation, must be carefully calibrated to avoid negative impact on financial stability and cybersecurity, as well as ensure they contribute to the goal of European competitiveness and ultimately benefit European people and businesses. Tackling the social menace of digital fraud must hit the problem at the root by acknowledging that banks cannot go at it alone and making telcos and online platforms part of the solution for the protection of consumers. Furthermore, for European banks to support Europe in the competitiveness and innovation race but also continue to be among the most cyber-mature parts of Europe’s critical infrastructure in the fight against cyber and hybrid threats, a long-term strategy to determine the most effective and efficient allocation of the sector’s resources is needed.

Enhancing bankability of the transition

Accompanying clients in their sustainability journeys remains a priority for the European banking sector. A pragmatic approach is needed to reduce risk, increase economic viability and availability of investments necessary for transition. The existing financing gap cannot be closed by public or private finance alone. Cooperation between the private and public sectors to increase the bankability and scalability of such investments is key.

Banks strategic to Europe’s competitiveness  

The European Banking Federation welcomes the College of the European Commissioners approved today at the plenary session of the European Parliament and supports its mission that aims to usher new era of productivity, innovation and competitiveness. Stéphane Séjourné, Executive Vice-President-designate for Prosperity and Industrial Strategy, charged with the task of delivering a new industrial strategy will play a key role in achieving this objective. EBF underlines the European banking sector’s commitment to working with the new European leaders to finance a competitive, thriving Europe.

The EBF board warmly congratulates María Abascal from the Spanish Banking Association (AEB) on her appointment as the new Chairwoman of the EBF Executive Committee, as of 1^st January and thanks Eelco Dubbeling for his leadership and dedication to advocating for the European banking sector over the past two years.

For more information:

Gabriel Daia, Head of Communications and Public Affairs, g.daia@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 federation 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.