A Stronger, More Integrated Banking Sector to Drive Growth

The banking sector plays a crucial role in helping Europe achieve its goals of economic growth, innovation, and competitiveness, but appropriate measures must be taken to enable it to fully harness its financing capacity.

This is according to a report by the Spanish Banking Association (AEB), CECA, and the National Union of Credit Cooperatives (Unacc), prepared in collaboration with EY, which estimates that, through regulatory and supervisory simplification and greater integration of financial markets, the sector could increase its lending capacity by more than 2 trillion euros, of which 250,000 million would correspond to Spain.

This increased financial capacity will drive investment in areas critical to strategic sovereignty. In the fields of digitalization, cybersecurity, and artificial intelligence alone, investment could reach 12,000 millones de euros annually in Europe and 1,200 millones in Spain.

Given that the banking sector already accounts for nearly 80% of business financing in Europe, the goal is not to deregulate or lower the requirements that underpin financial stability. The goal is to build a stable framework to expand the capacity to finance households and businesses and to support investments that strengthen Europe’s position in the new international context.

To this end, the following measures are proposed:

1. Inclusion of an explicit objective of competitiveness and growth within the mandate of regulatory and supervisory authorities.
2. Simplification of the capital framework through a comprehensive view of the overlaps.
3. Simplifying the supervisory framework to make it more efficient and focused on material risks.
4. Simplification of the European regulatory process, including a shift toward a regulatory framework based more on regulations and less on directives.
5. Completion of financial integration, including the establishment of the Banking Union with a single deposit insurance fund (EDIS) and the development of the Capital Markets Union.
6. Effective application of the principle of proportionality and supervision that focuses on material risks and is tailored to the size, complexity, and business model of each institution.
7. Simplification of regulatory reporting, including ESG reporting.
8. Establishment of a more proportionate and coherent digital regulatory framework.
9. The framework’s neutrality with respect to the various national models of corporate governance.

Given that financing needs in the eurozone exceed 1.2 trillion euros annually, it is urgent to boost the banking sector’s competitiveness through these measures, so that the sector can more effectively fulfill its role in supporting the economy.