HIGHLIGHTS FROM THE EBF BOARD

To build a competitive Europe, we must lay the right foundations now

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With pivotal European elections less than a month away, solid support for the European project is essential. This is a critical juncture that will determine Europe’s future growth, its competitiveness and, finally, the prosperity of its citizens.

The European Banking Federation (EBF) board strongly believes that Europe will not be able to meet the key challenges it faces without the banking sector, given its strategic role in delivering vital financing, as outlined in EBF’s recommendations to the next EU legislative term. To make this a reality, a purposeful approach to how banks together with capital markets can act as a catalyst for Europe’s success is needed.

Turning around Europe’s declining global competitiveness

Meeting in Brussels on 24 May, the EBF board discussed the vital role banks can play in Europe’s transformation.

Christian Sewing, President of the EBF Board and Chief Executive Officer at Deutsche Bank, said:

“The next five years could be make-or-break for Europe’s competitiveness. Extraordinary financing and investment need to be unleashed to secure the welfare of European citizens, boost sustainable growth, promote competitiveness and establish strategic autonomy. To get there, we need a regulatory and supervisory framework that fosters competitiveness. This includes prioritizing the integration of capital markets, the finalization of the Banking Union, and developing a strategic vision for Europe’s digital finance services. European banks play a key role in society – we are committed to working with the policymakers to strengthen Europe’s position on the global stage for generations to come.”

Given the widening competitiveness and growth gap, there is an urgent need to act in Europe. Therefore, European institutions must take the necessary measures to unlock crucial financing quickly.

A strategic banking sector for a competitive Europe

The European Banking Federation Board strongly believes that competitive and profitable banks are the foundation for an open, competitive, and strategically autonomous Europe. The sector is committed to continuing the work with policymakers to deliver a strategic vision for the European banking industry and build a future in which households and businesses can thrive.

Towards a more effective and efficient regulatory and supervisory framework

While the banking regulatory reform post-global financial crisis has succeeded in terms of bank resilience, it has also made the framework overly complex and risk averse. Simplification should be a primary objective going forward, removing redundancies between different pieces of legislation and various elements in the policy toolbox. Regulatory gold-plating is a source of inefficiency and should be addressed.

Competitiveness and enabling growth should be considered in the assessment when making policy and supervising European banks. The banking sector, regulators and supervisors should work together to make a regulatory and supervisory framework that enables the European banking industry to remain competitive in the global markets.

The entry into force of Basel III is set at least 6 months earlier in the EU than in other major jurisdictions. At this juncture, it is unclear if, and when, the US will implement it. This raises very important questions about the level playing field and the competitiveness of the European banking sector. More immediately, the European Commission should use its prerogatives provided in the Level 1 Banking Package to ensure that the fundamental review of the trading book is applied simultaneously across all jurisdictions to preserve fair competition. On the other hand, it is key that the EU agencies stick to the mandates received by the EU co-legislators not trying to change the spirit of the banking package through technical standards”.

Getting the capital markets right

Europe’s investment gap stands at an estimated 1 trillion euros per year. Further integration and development of capital markets in the framework of the Savings and Investment Union (SIU) – as presented by Enrico Letta – will be crucial in addressing this need. A recent EBF joint report confirmed that, as of now, European capital markets are facing a decline in competitiveness, particularly when compared to the United States. This poses a significant threat to Europe’s economic growth and its ability to finance innovation, support green and digital transformation, and address the needs of an aging population. Europe’s needs cannot be met by banks or governments alone – mobilizing private capital through capital markets is a crucial step towards achieving a more inclusive and efficient financing framework. Measures that can swiftly increase financing capacity, such as revitalizing the securitization market, must be a priority.

Digital finance is key to Europe’s open strategic autonomy

The last five years were marked by an overwhelming production of horizontal and sectoral policies on digital, in view of the, often, unprecedented opportunities and risks. Now it is time to assess the cumulative impact on EU businesses, including banks, their innovation potential and competitiveness.

The ongoing legislative and technical processes on financial data access, the digital euro, the payment services regulation, need to allow time for exhaustive deep-dives and meaningful dialogue. If not well calibrated, they would fail to meet real demand and bring concrete benefits to all, fuel cyber risks, as well as negatively impact the competitiveness of European banks, and ultimately, the competitiveness of Europe.

As the numerous legislative requirements will kick in during the next mandate, it is also crucial to address complexity, with a long-term view of where it is most strategic and efficient to allocate the huge resources that will be required for implementation, and with an explicit vision for EU banks.

The European Banking Federation also wanted to acknowledge the departure of Giovanni Sabatini from his position as Director General of ABI and thank him very much for his significant contribution over the years to the EBF, particularly as Chairman of the EBF Executive Committee for many years, and more generally, to the European banking sector.

For more information:

Gabriel Daia, Head of Communications & Public Affairs, g.daia@ebf.eu

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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.