Competitiveness is the capacity of banks to act as effective lenders and market intermediaries which source capital, provide liquidity, make markets and offer risk management solutions in support corporates and investors, whether institutional or retail, and governments. A competitive banking sector is not an end in itself, but a means to ensure that capital is efficiently allocated - including to productive investments-, that risks are appropriately managed, and markets continue to function smoothly across economic cycles, thus supporting the EU’s broader strategic objectives, including economic growth, innovation, the green and digital transitions, as well as long-term investment in infrastructure and strategic industries.
AFME advocates for competitiveness of the banking system by finalising the Banking Union, creating a single market for banking where capital and liquidity can flow freely within EU banking groups. The ongoing impasse in this area has unfortunately led to a suboptimal situation whereby EU/Banking Union (‘BU’) and Member State authorities retain overlapping mandates and do not defer to each other. This should be addressed as a matter of urgency as it results in unnecessarily duplicative requirements for banks, acts as a drag on their ability to scale within the EU and stifles their competitiveness. This has particularly acute consequences in those areas where scale matters most, such as banks’ capital market activities. For the EU to meet its investment needs in coming years, it will be critical that it considers the competitiveness of its banking system in terms of banks’ ability to provide direct lending as well as capital market solutions.