Claudia Buch: Building a resilient future - how Europe's financial stability fosters growth and competitiveness

Keynote speech by Prof Claudia Buch, Chair of the Supervisory Board of the European Central Bank, at the at the Eurofi Financial Forum 2024, Budapest 12 September 2024.

The views expressed in this speech are those of the speaker and not the view of the BIS.

Sustainable growth and the competitiveness of European firms are high on the European policy agenda. Over the coming years, growth in the euro area is projected to remain below 2% and thus lower than in the United States. This divergence in growth is not a new phenomenon. Increasing the productivity of European firms, while mastering the energy transition, and revamping crucial parts of the (digital) infrastructure are key challenges. And all this is happening in an environment characterised by heightened geopolitical risk. What Europe needs is long-term investment and firms that successfully innovate.

In Europe, more so than in other markets, banks play a particularly relevant role in funding the real economy, managing risks and safeguarding deposits. A stable and well-functioning banking system is thus a prerequisite for economic growth in Europe. Banks are regulated and supervised so that they can perform their roles without taking undue risks or threatening financial stability.

In the current debate, the question has been raised as to whether regulation and supervision have become too conservative to the point that they may constrain growth. Does the European approach to regulation and supervision prevent European banks from becoming more efficient, from providing better services to their clients and from successfully competing on a global scale? Would deregulation and lighter-touch banking supervision release more funding and promote sustainable growth?

In my view, the suggestions being put forward to relax banking regulation and supervision to promote growth are misguided and could have negative side effects.

The establishment of the banking union, ten years ago, was a significant achievement that has served European citizens well. European leaders responded to the global financial crisis and the European sovereign debt crisis by centralising supervision and resolution, by building new, strong institutions. The creation of European banking supervision in 2014 has had a positive impact on the stability of banks and market confidence. The banking union authorities apply harmonised prudential standards in an integrated banking market.