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EU banking policy and regulatory issues

Context

European banks entered the coronavirus (COVID-19) pandemic with stronger capital positions, higher liquidity buffers and better asset quality. So, this time European banks have been part of the solution.

These positive developments have been made possible also thanks to exceptional support measures from public authorities. However, the negative impact from such a shock is unavoidable provided that in addition this public support will have to end.

Yet the European banking sector was already beset by structural weaknesses when the Covid crisis hit: persistent low profitability caused by excess capacity, lasting very low interest rates and low-cost efficiency has driven bank valuations to historic lows.

Technology also opens the gates to further non-bank competition (such as from big tech firms), while at the same time providing scope to exploit new business opportunities. The need to address these structural issues is now more urgent than ever.

Furthermore, banks will have to address the global emerging challenges posed by topics such as climate-related financial risks, cyber risk, and operational resilience. These regulatory challenges will add to those related to the implementation of the most recent additions to the banking regulatory standards – Basel III – launched in the wake of the 2008 financial crisis, which still must be adapted to EU bank financing specificities.

Contributions to the policy debate

Extracted from the main Eurofi publications (Regulatory Updates, Views Magazines and Conference Summaries)

Public and private
sector views

Public authority views

EU banking challenges

D. Beau - Banque de France - Challenges for the EU banking sector in the COVID context: no time for complacency - April 2021 new

P. Callesen - Danmarks Nationalbank - Back to markets - April 2021 new

J. M. Campa - European Banking Authority (EBA) - Regulatory completion and effective implementation - April 2021 new

L. Máximo dos Santos - Banco de Portugal - Unusual crisis, unusual measures, big challenges - April 2021 new

J. Fernández - Committee on Economic and Monetary Affairs, European Parliament - Time to complete the Banking Union for a strong recovery - April 2021 new

E. Fernandez-Bollo - European Central Bank (ECB) - How healthy is the European banking sector in the pandemic? - April 2021 new

L. Garicano - Committee on Economic and Monetary Affairs, European Parliament - To have bank mergers the priority must be to complete the Banking Union - April 2021 new

S. Raspiller - French Treasury, Ministry of the Economy, Finance and the Recovery Plan, France - The completion of the Banking Union should aim at improving the profitability and the competitiveness of EU banks - April 2021 new

B. Vasle - Bank of Slovenia - New and old challenges for European banks - April 2021 new

K. Wiedner - DG for Financial Stability, Financial Services and Capital Markets Union, European Commission - Addressing the fall-out of the Covid-19 pandemic on the financial system - April 2021 new

Implementing the Basel framework in Europe

A. P. Serra - Banco de Portugal - Building resilience of the EU banking system through regulation - April 2021 new

L. F. Signorini - Banca d’Italia - How should Basel banking standards evolve now? - April 2021 new

O. Karas - Committee on Economic and Monetary Affairs, European Parliament - Making financial markets work for the Future of Europe - April 2021 new

G. Haber - Oesterreichische Nationalbank - Lessons from the COVID-19 pandemic and how regulatory banking standards should evolve - April 2021 new