A strategic banking sector for a competitive Europe

The European Banking Federation (EBF) has published a document with recommendations for the next EU legislative cycle. Among the key priorities included in the report, to finance the future prosperity and strategic autonomy of Europe, and to restore the international competitiveness of the region, it will be essential to recognize the key and strategic role of banks in the transformation of the European economy, financing the transition towards a green economy and promoting a safe digital transformation. 

Main recommendations of the report, categorized under 3 main priorities:

• Finance Europe’s future prosperity and strategic autonomy: According to the report it is essential to acknowledge the banking sector as a strategic sector in the context of the EU’s open strategic autonomy vision by ensuring that European banks can be more competitive, to the benefit of European households and businesses within an enabling regulatory and supervisory framework. According to the report, the focus should be on completing the Single Market, considering the Banking Union as a single jurisdiction, and developing European Capital Markets, to mobilize private capital at the necessary scale needed for Europe's economic transformation.
  
  The report also highlights that while banking regulation has focused on stability, there is now a growing need to prioritize competitiveness and growth. In this sense, from now on it would be advisable to apply a regulatory competitiveness test to check the impact on competitiveness of any EU legislative proposal before being approved or before any legislative review.
  
  
• Maintain Europe’s leading role & act together to achieve the transition towards a sustainable economy: Achieving the 2030 EU climate targets alone necessitates investments amounting to 700 billion euros annually. This formidable challenge necessitates a robust, efficient, competitive and profitable banking sector, coupled with deeper European capital markets. banks, as intermediaries, cannot drive alone the transition of the economy.
  
  
• Develop a strategic vision for Europe’s digital financial services where banks can deploy meaningful innovation in a cyber resilient ecosystem: Some examples of the recommendations provided in this section would be the following:
  
  
  • The EU institutions should support and capitalize on private initiatives, such as some currently being developed, and enable sustainable business models to meet the objectives of the sovereignty of the European payment system as desired.
    
    
  • Regarding digital frauds, the report states that all parties in the chain leading to fraud in authorized payments, especially telecom companies and internet platforms, should be legally required to implement fraud prevention measures and collaborate with others in the chain and take their share in reimbursing victims of fraud. The rules on fraud victim reimbursement need to be clearly framed to essentially protect consumers from giving up vigilance and the market from moral hazard.
    
    
  • On the Digital euro, the decision to eventually issue the digital euro should be subject to scrutiny by the European Parliament, the Council and the Commission based on a report by the ECB that demonstrates that the issuance of the digital euro will create concrete benefits to end-users, intermediaries and the economy as a whole, while having mitigated ex ante any adverse effects on financial stability (especially in periods of stress) or on existing payment solution.