HIGHLIGHTS FROM THE EBF BOARD

Powering sustainable growth in Europe

x

Stark economic predictions of the past few months have become a reality, with inflation continuing to climb and forecasted to increase by 9.3% this year in the EU. European industry and individuals are facing an energy crisis and cost-of-living pressures, as the bloc’s leaders work to stay the course on delivering its strategic objective of sustainable transition. In this uncertain world, the banking sector is a key source of resilience.

Filling the investment gap  

In the next decade, the European economy will need vast additional financing resources from banks to fuel recovery, the green transition and the digital transformation. Significant financing will be required to support businesses’ and households’ switch to renewable energy sources and to cope with the current headwind in the meantime.

The EU needs all the financing power that banks could offer. The European banking sector is in a stronger position than other jurisdictions and way above the targets set at the onset of the regulatory reform. EU policymakers have the opportunity to design a banking prudential framework that keeps the current level of resilience and caters for the needs of the European economy. The European Commission and Council have taken the approach to not raise the costs for businesses in the process of improving their environmental performance and not to withdraw the essential funding available for lending to the European economy. It is important that the European Parliament follows suit.

On one hand, the Banking Reform Package should strike the right balance between capital requirements and lending capacity, for which purpose it is essential to consider the European specificities and deliver on the G20 mandate to not significantly increase capital requirements.

On the other hand, the securitisation regulation should be reviewed to ensure it can foster the Capital Markets Union (CMU), unleashing huge resources to finance the European strategic objectives.

Banks remain committed to net zero goal

Despite the short-term effects due to the economic volatility triggered by recent shocks, European banks remain fully committed to their net zero goals, according to a recent report by the European Banking Federation and EY. It shows that sector attitudes have been affected by rapid changes in the economic positions of different industries. On the upside, banks see the current crisis as accelerating medium to long-term demand for financing sustainable growth.

The research also shows that banks have a strong sense of social responsibility and desire to engage, not divest, particularly in emerging markets where withdrawal of financing capacity would trigger economic and social disruption. But banks face practical challenges as they seek to provide continuing post-pandemic credit to support the need of those affected by the energy crisis and to support the gradual decarbonization of the whole economy. To meet these challenges, clear sectoral transition pathways and measurable transition plans, backed up by effective stakeholder engagement, will be vital to delivering real-world impact.

Getting the digital euro right

The digital euro project can have far-reaching effects, including permanently altering the European payment services landscape. It can also result in a reduction of banks’ funding and liquidity sources and financing capacity. As policymakers consider the next steps for a European CBDC (Central Bank Digital Currency), the first and foremost concern needs to be that it provides added value to citizens while mitigating risks. It is essential that privacy and cybersecurity are safeguarded while ensuring that AML and other controls remain in place. At the same time, a digital euro must stimulate innovation by providing the basis for the private sector to build new services for the benefit of consumers and businesses. It is also necessary to address in advance all concerns regarding financial stability and the financing of the European economy.

Banks stand ready to contribute to both the strategic discussions and technical work on the digital euro, to help ensure it adds value to the citizens and acts as a catalyst of innovation in European payments and the economy at large.

Christian Sewing elected as EBF president

The EBF board has announced the election of its new President Christian Sewing, Chief Executive Officer of Deutsche Bank and President of the Association of German Banks (BdB), who will succeed Ana Botín in March next year.

Commenting on his election, Christian Sewing said, “I look forward to serving as President of the EBF and would like to thank Ana for her leadership during this crucial period. Throughout recent years, banks helped families and businesses navigate the unexpected and proved themselves as solid and reliable partners for their clients as well as Europe’s regulators and authorities. To help unleash major investments needed to finance the sustainable transformation and digitization of the economy, Europe needs a strong, united and globally competitive banking sector. Together with EBF members and executive team, we will continue our work towards these objectives as the future of our industry will be shaped first and foremost on a European level”.

Commenting on the announcement, Ana Botín said, “Congratulations to Christian on his appointment. Christian is an excellent leader with a deep understanding of the challenges faced by the banking sector in our region and a clear perspective on how the regulatory framework needs to evolve to support the global competitiveness of European banks. I would like also to thank the EBF team for its professionalism and dedication to serve and represent the interests of the banking sector in Europe”

For more information:

Rūta Barthet, Senior Media and Communications Officer, r.barthet@ebf.eu

x

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.