EBF Responds to EC Consultation on the Competitiveness of the EU Banking Sector

EBF RESPONSE
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EBF Responds to EC Consultation on the Competitiveness of the EU Banking Sector

Brussels, 19 April 2026 - The European Banking Federation (EBF) submitted its response to the EC Consultation on the Competitiveness of the EU Banking Sector.

In a world increasingly shaped by geopolitical shifts and renewed competition for economic leadership, the European Union stands at a pivotal moment. As Mario Draghi and Enrico Letta have clearly diagnosed, Europe's competitiveness and future prosperity are at risk unless it undertakes bold reforms to restore its economic sovereignty and unleash its full potential.

The time for Europe to catch up and close the gap with its major competitors is now. Prompt and decisive action is essential to ensure the implementation of key recommendations in the Draghi and Letta reports before 2030.

We note that the Commission's consultation presents a large series of potential actions towards these goals, some of which will require a long time for implementation. It is therefore essential to identify the changes that can increase European competitiveness as soon as possible and deliver tangible results from now to 2030. Paving the way towards further integration is key, but it should not turn attention away from the focus on short-term reforms.

The EU remains a predominantly bank based financial system, where banks are the main source of external financing for households and non-financial corporations, especially SMEs, which still face limited access to capital markets. At the same time, there is a strong correlation between economic growth (GDP growth) in Europe and the expansion of lending. Therefore, more growth requires further lending - for this to occur, banks' lending capacity must increase.

The biggest obstacle to increased lending capacity is the inefficient use of bank capital, an essential resource towards raising European competitiveness. European banks already meet the fully-loaded Basel 3.1 capital requirements - therefore, there is no issue of capital adequacy, but rather of capital efficiency. However, bank capital in EU remains trapped by overlapping requirements of numerous authorities at both the European and national levels. If lending capacity is to increase, it is imperative to stop - and even reverse - the compounding of capital requirements caused by this fragmentation of regulatory powers.

European banking regulation includes extensive gold-plating which, together with the use of supervisory and national discretions, adds up to 66% to the minimum requirements of the Basel standards. One clear example is the excessive number of tools under the envelope of macroprudential policy. Proposals to merge buffers in two buckets, one non-releasable and another releasable, could be a way to improve the use of the framework, but it would not result in meaningful reform if the size of the buffers remains untouched. Today, NDAs can require more than 10% of CET1 capital. This needs to be reduced dramatically for the sake of certainty and predictability, and to reduce fragmentation and gold-plating.

A further source of inefficiency is the allocation of capital to loans according to EU rules that are far from market and business-oriented criteria. EU decisions should incorporate the business perspective in line with Draghi recommendations, rather than reflect standalone supervisory perspectives that do not have a clear mandate on competitiveness.

To this end, it is important to debunk myths that blur the objective of competitiveness. One of them is "simplification without deregulation". EU regulation is massive and extremely complex. Certain parts are effective and useful, whereas others are duplicated, cumbersome, and inefficient. Legislators should preserve the effective parts of the regulation but should not hesitate to reform or undo the unnecessary parts, especially gold-plating. Addressing fragmentation that locks up liquidity and capital is also essential.

The successful implementation of reforms enhancing the competitiveness of the European banking sector will determine the success of broader EU competitiveness objectives. The EBF will continue engaging with policymakers in this unique opportunity to re-assess and boost both banks' and the EU's competitiveness in support of a stronger Europe.