German Banking CongressCapital markets unionEurope

Sewing: Europe must shift into a higher gear when it comes to the capital markets union

22.04.2024Press release
Thomas Schlüter
  • The Banking Congress welcomes EU discussions regarding the single financial market 
  • Financial market regulations in need of review
  • Europe’s banks at risk of a competitive disadvantage on the international stage

Private banks in Europe believe that new opportunities are opening up for progress towards a capital markets union in Europe. “The capital markets union is currently higher on the European political agenda than it has been for years, a fact we explicitly welcome,” said Christian Sewing, President of the Association of German Banks, at the 23rd German Banking Congress in Berlin. The European economy must take advantage of this opportunity, he continued: “We simply cannot let this issue fade into the background once more after the European elections. Instead, we are doing everything possible to ensure that we shift into a higher gear.” 

Last week, the EU heads of state and government once again discussed the path to a capital markets union, and the subject also played an important role in the Letta report on the European single market. However, according to the Association of German Banks, the continent is still failing to utilise the full potential of the joint European market. 

And this despite the fact that Europe’s financial sovereignty is strongly linked with its strategic sovereignty. The Association is clear that the banking and capital markets union will have a key role to play if the European Union is to continue to develop its economic strengths. This, they say, will require higher and more sustainable growth in both Germany and Europe. “Without well-developed capital markets, Europe will never be able to invest as much as is necessary,” said Sewing. “The capital markets union would therefore be one of the cheapest growth development programmes available. There is no other option than to urgently forge ahead. The same applies to further integration of financial markets.” 

In addition to focusing on a strong domestic European market, he said, the next European Commission would need to take a hard look at financial market regulations, which have become much more complex, expensive and excessive over the past few years. There is therefore a need, according to Sewing, to review the existing European regulatory framework. Regulations must be simplified, redundancies eliminated and requirements for financial institutions reduced without endangering financial stability, he continued, stating that there is quite a lot of room for improvement. 

He then added that it is important to establish a level playing field in the realm of international competition. European financial institutions are, after all, faced with stiff international competition. Sewing emphasised that it is therefore very important that they not be subjected to regulatory disadvantages.

He pointed out that currently, the new Basel regulations regarding capital requirements for trading activities could be introduced at different times in different places. In the EU, these regulations are to come into force starting on 1 January 2025, whereas they will only be implemented in the USA and UK at a later date. In addition, it seems that both countries will introduce a more lenient standard than that which will go into force in the EU. “The deferment provides the banks in these countries with a major competitive advantage for capital market business,” said Sewing. “The European Commission must react with urgency.”

Thomas Schlüter
Thomas SchlüterHead of Communication, Director