Global: European Banking Federation Advocates for Streamlined Regulations and Strategic Recognition for Banks

The European Banking Federation (EBF) has made a call to the European Union (EU) to streamline banking regulations and to officially recognize banks as a “strategic sector.” This initiative is aimed at enhancing the competitiveness of European banks, as reported by Reuters on Tuesday, April 16.

During a media briefing, EBF CEO Wim Mijs emphasized the need for Europe to reconsider its strategic sectors such as defense, energy, and manufacturing, which he noted have largely been reliant on external powers like the United States, Russia, and China. The formal request by banks to be considered a strategic sector marks a significant step, one that was first suggested by EBF President and Deutsche Bank CEO Christian Sewing last year.

The specific benefits of being labeled a strategic sector remain undefined, as the EU does not maintain a public list of such sectors. However, the banking sector’s plea includes a call for the streamlining of regulatory processes. According to the EBF, while regulatory reforms post-global financial crisis have bolstered the stability of the sector, the current regulatory landscape is described as excessive, cumbersome, and overly expansive.

The EBF advocates for a regulatory review that balances stability with competitiveness and growth. This stance, however, has faced criticism from those who argue that stringent regulation is essential for maintaining stability within the banking sector.

Contrasting views on regulation were highlighted last year by Francois Villeroy de Galhau, the head of France’s central bank, who pointed out at Bloomberg News’ Future of Finance Forum on May 9, 2023, that European banks face more rigorous regulation than their American counterparts. He emphasized the robustness of European banks, noting their significant capital and liquidity reserves and strict adherence to Basel standards and the unified supervision of the Banking Union since 2014.

In a related development, the European Council approved a regulation in February making instant payments in euros accessible to consumers and businesses within the EU and European Economic Area, marking a significant step towards enhancing the financial services infrastructure in the region.