European Banking Rules Under Scrutiny as Growth Risks Loom

London, 27 January 2026 — Europe’s economic expansion risks falling behind other major global regions unless significant reforms are introduced in the banking sector, the European Banking Federation (EBF) has warned. The federation cautions that the current supervisory framework has become increasingly complex and fragmented, impeding banks’ capacity to lend effectively.

Slaomir Krupa, EBF President and CEO of France’s Société Générale, described the existing system as “neither satisfactory nor sustainable.” In a letter dated 19 January addressed to European Commission President Ursula von der Leyen and other senior officials, Krupa highlighted that banks are operating under excessively high capital requirements, which he believes are constraining economic growth across the continent.

According to EBF data covering 2021–2024, fifteen leading European banks have maintained over €100 billion in additional capital to meet supervisory requirements. This has forced these banks to utilise nearly 90% of their net capital, limiting their ability to extend credit to businesses and households.

European Banking Statistics (EBF 2021–2024)

The persistent slowdown in European growth has long been a source of concern for policymakers and business leaders alike. Efforts to unify the fragmented banking regulatory landscape have so far yielded limited success, adding further complexity. An EU Commission spokesperson emphasised that regulatory simplification is a “top priority,” but noted that meaningful change requires active participation not only from the Commission but also from national governments, parliaments, and supervisory authorities.

International developments are placing additional pressure on European banks. In the United States, President Donald Trump has been advocating a rollback of regulatory constraints on banks, while the United Kingdom has already implemented some relaxation of rules. Krupa warned that “without reform, Europe risks being competitively disadvantaged on the global stage.”

In December, the European Central Bank (ECB) proposed measures aimed at simplifying banking regulations, although progress in reducing compliance costs has been limited. The EBF has recommended capital reallocation, elimination of systemic risk buffers, and the alignment of trading rules with international, particularly US, standards to maintain competitiveness.

At current exchange rates, 1 US Dollar = €0.8413, illustrating the potential cross-border financial implications of these regulatory differences.