The European Banking Federation stated on Tuesday that Europe confronts a growing €1.4 trillion ($1.62 trillion) yearly investment deficit that could impede its economic goals, including the energy transition, and called for more straightforward regulations to assist banks in financing expansion.
Based on studies by consultancy Oliver Wyman, which was hired by the European Banking Federation (EBF), the amount was increased from previous projections of €800 billion in 2024 and €1.2 trillion in 2025.
EBF stated that the investment gap is a result of growing funding requirements in sectors including energy, defense, digitalization, and industrial capacity.
Compared to the United States, banks in Europe contribute far more to the actual economy—roughly 65%.
Banks are advocating for changes because they believe the regulatory environment is limiting lending.
In July, the European Commission is scheduled to evaluate the competitiveness of the banking industry; in 2027, legislative measures are anticipated.
The Commission has been asked by France and Germany to propose an ambitious “financial services simplification package” that would simplify and ease the burden of EU regulations.
There has already been some movement indicated by regulators. The European Banking Authority (EBA) presented plans in April to streamline supervisory reporting and lighten the load on banks.
Lenders criticized the European Central Bank’s December proposal to streamline regulations without lowering overall capital requirements.
Banks have long lamented the burdensome nature of oversight. In an effort to spur prosperity, some nations—most notably the US—are currently advocating for loosening capital regulations and reducing regulations.
To improve coordination among regulators and maintain post-crisis safeguards, the EBF urged for targeted simplification.
According to the EBF, banks could target about 20% of Europe’s additional funding needs with an extra €150 billion. It also stated that a 1% decrease in CET1 capital requirements would save up €95 billion.
Additionally, it pushed for quicker completion of the banking union, including a shared deposit insurance program, and strengthening of the capital markets.
