Key facts
- Europe's annual investment gap has widened to an estimated €1.4 trillion.
- The European Banking Federation (EBF) says this gap hinders economic objectives like the energy transition.
- Banks cite regulatory constraints as a barrier to financing growth.
- The EBF suggests that an additional €150 billion in financing from banks could meet 20% of Europe's additional needs.
- A 1% reduction in CET1 capital requirements could release €95 billion for lending.
Europe faces a significant and widening annual investment gap of €1.4 trillion, a figure revised upward from previous estimates, according to analysis commissioned by the European Banking Federation (EBF). This gap poses a risk to the region's economic objectives, including its energy transition goals. The EBF attributes the increased funding needs to areas such as energy, defense, digitalization, and industrial capacity. European banks, which provide approximately 65% of financing to the real economy, argue that the current regulatory framework is overly burdensome and constrains their ability to lend. They are actively pushing for changes, with France and Germany advocating for a simplified regulatory approach. In response, the European Commission is expected to release an assessment of the banking sector's competitiveness in July, potentially leading to legislative proposals in 2027. Regulators, including the European Banking Authority and the European Central Bank, have already begun outlining measures to simplify supervisory reporting and streamline rules, though concerns remain about overall capital requirements. The EBF specifically called for targeted simplification, improved regulatory coordination, and faster progress on strengthening capital markets and completing the banking union, including a common deposit insurance scheme. They estimate that an additional €150 billion in financing from banks could meet around 20% of Europe's additional funding needs, and that a 1% reduction in CET1 capital requirements would release €95 billion.