Nicosia: European banks are being held back by over pound 1 trillion in idle capital due to fragmented regulation, CEO of the European Banking Federation (EBF) warned on Wednesday, urging EU policymakers to shift from rigidity to pragmatism to avoid falling behind global competitors.
According to Cyprus News Agency, speaking at the Annual General Meeting of the Association of Cyprus Banks, EBF CEO Wim Mijs described the current financial landscape as a ‘Tale of Two Trillions.’ On one side, he mentioned that the EU needs to mobilise around pound 1 trillion annually to meet its green, digital, defence, and industrial goals. On the other, a nearly equal amount of capital remains locked in the system, constrained by regulatory inconsistencies across member states.
Mijs stated, ‘This rigidity stifles lending. It holds back investment. And it hampers banks’ ability to serve households, SMEs, and innovators.’ He highlighted a 60% rise in capital add-ons between 2021 and 2024, calling the resulting patchwork ‘a hidden brake on Europe’s growth.’
He cited recent reports by Mario Draghi and European Commission President Ursula von der Leyen, warning that Europe’s ambitions risk collapse if its banking sector remains constrained while others – notably in the US and UK – operate under more flexible rules. ‘Robustness without proportionality is not resilience – it is rigidity,’ he said, adding that excessive capital requirements have already raised CET1 buffers by 67%, tying up pound 273 billion that could otherwise support up to pound 4.1 trillion in additional lending.
Mijs welcomed the European Commission’s move to reduce regulatory burden by 25%, but cautioned that ‘good intentions must be matched by execution.’ He emphasized that efforts to simplify financial rules – especially around ESG and sustainable finance – must progress faster to provide clarity and reduce compliance overload.
On digital innovation, Mijs expressed concern that the Financial Data Access (FiDA) proposal, part of the EU’s open finance strategy, could expose European institutions to unfair competition. He also noted that the proposed digital euro, while strategic, could cost banks up to pound 18 billion over four years, according to an EBF-commissioned study by PwC. ‘Strategy must go hand in hand with economic logic,’ he said.
Furthermore, Mijs called for greater accountability from tech platforms and telecom providers in tackling online fraud, urging regulators to exempt banks from overlapping cybersecurity rules under the new Cyber Resilience Act (CRA).
Regarding the establishment of the EU’s new Anti-Money Laundering Authority (AMLA), Mijs proposed a formal ‘Boardroom Dialogue’ between regulators and senior banking compliance leaders to enhance trust and collaboration.
In closing, Mijs urged policymakers to act decisively. ‘Europe does not need more regulation. It does not need less regulation. It needs better regulation,’ he said. The CEO of the European Banking Federation emphasized that Europe needs unity instead of fragmentation, clarity rather than complexity, and bold execution in place of endless debate. This, he suggested, is the path to transform resilience into competitiveness and ambition into real opportunity.