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.
The post To build a competitive Europe, we must lay the right foundations now appeared first on EBF.
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European Banks call for developing a shared vision for the financial sector to preserve Europe’s competitiveness
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The Board of the European Banking Federation (EBF) met in Madrid on 24 November 2023. It was the opportunity to reflect on the resilience built up over the last years, with a focus on recent advancements during the Spanish Presidency. It also allowed a discussion on the key areas where further progress is needed to enhance the competitiveness of the sector and the economy as a whole.
The current environment is particularly challenging given the emerging geopolitical tensions, the ongoing conflicts in Europe and in the world and the uncertain macroeconomic environment. Against such a challenging context, European banks have not only shown remarkable resilience but also continue to play a major role as a source of finance. Thanks to a sound capital and liquidity base, as well as a strong risk culture, European banks are continuing to contribute to the European economy by supporting their clients and financing businesses and households.
Recent crises have highlighted Europe’s vulnerabilities in defense, security, energy, and supply chains, accelerating its competitive decline against regions like the US and Asia. This is a very important source of concern as competitiveness fosters growth, indispensable for the well-being of Europe and its citizens. It is also essential for servicing the debt of states and companies, financing the green transition, investing in digital innovation and (cyber)security, and supporting an aging population.
To retain and restore its competitiveness, Europe needs to boost its financing capabilities. The needs are immense, amounting to trillions of euros annually. Any proposal that limits this financing capabilities, like potentially increasing the minimum reserves held at the ECB, should be avoided.
This is why, now more than ever, Europe needs a banking sector that is resilient, profitable, and competitive. It is key to funding the substantial investments for both immediate and long-term challenges.
Banks are ready to fulfill their societal roles but need an enabling regulatory environment that keeps them competitive globally and ensures fair competition in financial services. Additionally, in a world increasingly marked by conflict and the formation of blocs, Europe must focus on financial autonomy and – while remaining open to third countries – needs to develop its financial sector, including both banking and capital markets.
“As we approach a crucial juncture in the European Union with the next EU elections taking place in June 2024, I believe it is vital to recognize the fundamental and strategic role of banks in Europe as we navigate this transformative era “, said Christian Sewing, CEO of Deutsche Bank and EBF President. “Any programme to ensure Europe’s competitiveness and to finance the transformation of our economies must include strategies to strengthen the EU’s financial sector, including a capable and effective banking industry and a significant deepening of capital markets. Therefore, it is essential for European decision-makers to develop a shared vision for the banking and financial sector, enabling it to fully perform its societal role and support the economy in the coming years.”
Boosting European Capital Markets
Neither States nor banks alone will be able to finance all the emerging needs of the economy. A sizeable portion needs to come from capital market financing.
Therefore, it is crucial and urgent for Europe to create the conditions to attract long-term risk capital to a much greater extent and to boost the development of capital markets and ensure further integration within a true Capital Markets Union (CMU). Otherwise, Europe will not be able to finance its sustainable transformation and keep up with technological advancement. To achieve meaningful change going forward, the development and deepening of markets backed by a more flexible and future-proof regulatory framework will be vital.
The European securitisation market must also be strengthened. Securitisation is a simple instrument for facilitating more lending – even to companies that do not have access to the capital market. The volume of securitisations is growing significantly in many regions – but not in the EU. We are leaving considerable potential untapped here. There are many reasons for this: our regulatory framework is far too complicated; the processes take too long and are too expensive. We need to change this as quickly as possible and activate the securitisation market in the EU.
To establish a CMU, several critical reforms to remove cross-border obstacles remain to be launched or completed. This makes it important to build consensus around a prioritization and sequencing of the next-generation reforms. Importantly, there is a growing recognition that, beyond the removal of EU-level obstacles, the further development of markets also requires national actions as well as a broader societal uptake of the products and services offered through capital markets.
Focus on transition finance to unlock the potential of the climate objectives
European banks reaffirmed their role in channeling finance to projects and companies to transition to more sustainable business models and decarbonize their activities. Banks are working closely with their clients to ensure inclusive access to transition finance and also actively embedding ESG in their businesses. To ensure an enabling regulatory framework for these efforts, banks call for additional clarity on the transition finance framework as well as solutions for data availability and streamlined rules. What is particularly missing are EU sectoral transition pathways and roadmaps laying down a common framework and facilitating progress assessment, according to a recent EBF paper. Banks also call attention to the issues beyond the scope of financial sector rules, notably, stronger public incentives to reinforce the viability of sustainable investments and to encourage the required shift in economic activity.
The Digital Euro
As the Digital Euro project has moved from the investigation to the preparation phase, critical questions have to be addressed: the impact on existing payment infrastructure and services, the cost-benefit assessment for citizens including privacy aspects and the repercussions on banks’ access to funding and, therefore, on financial stability especially in times of economic stress. It will be essential to identify opportunities and mitigate risks more concretely and in close collaboration between the public and private sectors, both at the strategic and technical levels.
At the same time, as the legislative process for the digital euro regulation and the development of a rulebook for a digital scheme is underway, the EBF reiterates the need for a sustainable model that can ensure a value proposition for all actors, minimizing duplications and fostering innovation.
Finally, the EBF would like to express its gratitude for the opportunity presented in Madrid to share its suggestions with Nadia Calviño, Vice-President and Minister for Economic Affairs, Trade, and Enterprises of the Spanish Government, Pablo Hernández de Cos, the Governor of the Banco de España, Rodrigo Buenaventura, the Chairman of the Spanish Securities Market Commission (CNMV), as well as with Enrico Letta, former Italian Prime Minister, who has been tasked by the European Council to prepare a report with concrete recommendations on the future of the Single Market in Europe.
For more information:
Vittoria Barbieri, Communications Officer, v.barbieri@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.
The post European Banks call for developing a shared vision for the financial sector to preserve Europe’s competitiveness appeared first on EBF.
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Towards a globally competitive, purpose-driven European Banking sector
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Over the past decades, the European banking sector has undergone an unprecedented transformation. Most recently, it has shouldered the Covid-19 crisis by continuing to finance households and businesses throughout this challenging period. It is now time to look to Europe’s future. Our sector has a key role to play in delivering the region’s digital and sustainable transition. To advance this transformation, and ensure the European economy is underpinned by a stable, secure, tech-intensive and inclusive financial ecosystem, a regulatory reset is needed.
The European Banking Federation Board, which convened in Brussels and online on November 25th, discussed the key priorities, opportunities and challenges for the banking sector. As the prudential reform enters into the EU co-legislative phase, it will be crucial to work together to find solutions that will allow banks to finance Europe’s twin transition. It’s also vital to ensure that regulation and supervision promote fair competition and innovation in the rapidly moving digital financial landscape, defined by new market actors, fragmented value chains and changing customer needs. As the world tackles the climate crisis, we should remember that each step towards the goal of Net Zero is important. We cannot underestimate the leading role that Europe can play on the global stage.
Executive Vice President of the European Commission and European Commissioner for Trade Valdis Dombrovskis delivered a speech to the EBF board members. “Europe needs healthy and dynamic banks playing a full part in the recovery. We need continuity and predictability as we navigate the continuously changing environment. Our priority is to support the sustainable and digital transition in which the banking sector has a key role to play”, he highlighted.
Rules fit for deeper integration and global competitiveness
The recently published European Commission’s banking package pinpoints the most relevant issues and topics for further discussion. Now, we must work towards permanent and balanced solutions that will help maintain banks’ current capital ratios without reducing their capacity to finance the economic recovery, including companies of all sizes, and to fund Europe’s and their own digital transformation and sustainable transition. Among other recommendations outlined by the EBF to deliver an effective and balanced prudential framework for banks and our clients – European households and businesses. The banking package is a unique opportunity to progress towards a truly integrated European banking market and to preserve an international level playing field in this industry.
In parallel to a well-functioning Banking Union, further integration and deepening of the EU’s capital markets is a key element of an inclusive and sustainable growth strategy. As users of and providers of services to capital markets, Europe’s banks will be pushing for the necessary reforms as part of the Capital Markets Union Action Plan to enable the growth of the products and services underpinning a greener, more competitive, innovative economy that benefits all European citizens and companies.
Fighting the climate battle on all fronts
To tackle the global climate challenge, an urgent shift of both private and public sector resources towards a low-carbon economy is essential. The COP26 conference has kept the goals within reach but also left important challenges as next steps, as outlined by EBF’s President Ana Botín. Financial institutions are not only going to be impacted by climate change; they are a key piece of the puzzle when it comes to finding a solution. However, we must remember that is not a black-and-white issue – the economy’s transition to Net Zero requires financing of companies and activities that may not meet strict environmental thresholds, like the EU taxonomy, but can still improve their performance and contribute to the EU objectives.
We also must look at the bigger picture. While Europe leads the sustainable transition on many fronts, our region’s decarbonization alone will not solve the global crisis. European leaders should turn their focus outwards and share their valuable expertise to guide the transition to Net Zero. Nearly a quarter of EU banks’ exposures are to entities outside of the EU. Global cooperation and harmonization are key to preventing market fragmentation and facilitating the flow of capital where most needed.
Adding value to customers in digital finance
In an environment where tech companies offer financial services but do not follow the same rulebook as banks, a new approach to regulation needs to address the operation, cybersecurity and resilience of the financial ecosystem as a whole. Big Techs are critical service providers to banks but they also target valuable segments of the financial business model, with the help of privileged infrastructure control and data from adjacent sector activities. All the while, they do not need to comply with the same financial safeguards and regulations as banks. As highlighted by Olivier Guersent, Director-General of DG Competition at the European Commission, during EBF’s Digital Thursdays event series, “Rules and regulations in the financial services sector should apply the principle of same activities, same risks, same rules”.
Given the decisive value of data in competing within digital finance, any discussion on open finance can only be part of the broader discussion on a European data economy. The banking sector is already sharing core customer data as a legislative obligation but, as this is not the case with other sectors, any proposal for further open finance must be preceded by a framework ensuring data sharing across sectors.
With the digital euro formally in the investigation phase, we need a solid understanding of the strategic objectives it would serve, and an inclusive process to explore how it could be best designed to benefit businesses and citizens. This is an unprecedented undertaking that touches upon fundamental issues of financial stability, monetary policy and operation of the financial system. The potential implications of this project should be carefully assessed by the European Central Bank together with the banking sector.
Reflecting on the road ahead, EBF President and Executive Chair at Banco Santander Ana Botín said: “A resilient banking sector that can continue to support our society needs to be competitive in the digital economy. This requires a regulatory framework that is able to evolve and be coherent in the digital age while allowing banks to continue to invest and meet the new and increasingly demanding needs of customers. We will continue to engage with authorities and regulators to work together on achieving a level playing field, and on how we can support our customers to help them transition to net zero.”
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About the European Banking Federation:
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.
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