European bank competitiveness: Enabling banks to play a greater role financing European growth (European Banking Federation)
Summary
- Europe requires an estimated additional annual investment of approximately €1.4 trillion, equivalent to around 7% of GDP, to finance its growth, digital, energy, defence, and transition goals.p.5
- Banks represent the primary debt source in Europe, providing approximately 65% of financing to the non-financial sector.p.9
- To fund 20% of Europe's additional annual private investment needs under current regulatory constraints, European banks would require €150 billion in additional CET1 capital.p.14
- Securitisation markets remain underdeveloped in the EU, with data centre debt securitisation reaching $0.8 billion between 2018 and 2025 compared to $63.6 billion in the US.p.25
- Full implementation of the Basel III output floor by 2030 is estimated to increase EU G-SIBs' Risk-Weighted Assets (RWA) by approximately 12%.p.22
Key insights
- Europe's additional annual investment demand has increased to €1.4 trillion, surpassing the €800 billion estimate in the 2024 Draghi report.p.7
- Regulatory constraints have driven European banks toward lower-risk, shorter-duration balance sheet assets like residential mortgages over long-term productive investments.p.12
- Increasing capital requirements absorbed over 90% of retained earnings across a sample of 15 European banks between 2021 and 2024.p.16
- The EU bank capital stack consists of 7 buffer layers resulting in up to 86 distinct capital requirements across member states, compared to 3 layers in the US.p.18
- Capping the Other Systemically Important Institution (O-SII) buffer at 1% for non-G-SIBs could release approximately €50 billion of CET1 capital.p.21
- Removing the Systemic Risk Buffer (SyRB) could free €19 to €29 billion of capital and enable between €120 and €230 billion of additional lending.p.22
- Incomplete Banking Union cross-border waivers keep more than €225 billion of capital and €250 billion of liquidity trapped in national subsidiaries.p.28
Topics and entities
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