- Mobilisation of private capital needed
- Capital market in Europe remains underdeveloped
- Increasing the minimum reserve sends out the wrong signal
At this year’s Annual Meetings of the IMF and the World Bank in Marrakesh, President of the Association of German Banks, Christian Sewing, emphasised how important the financial markets are for a sustainable economic transformation. “The financial economy can and will make an important contribution to ensuring the transformation is a success – but to do this we need the right framework conditions,” said Christian Sewing.
And, for the association, this includes making progress on the path to a European capital markets union. “Only an integrated, open and liquid capital market will allow Europe to mobilise enough capital for the transformation of our economy,” he continued. “Today, investments from major investors are bypassing the EU. That has to change.”
At the same time, however, a strong banking sector is also required. “We must create the right conditions in Europe for globally competitive banks.” But that does not mean putting up more and new hurdles that weaken our competitiveness.” The President of the association criticised the parallel existence of both national and European capital regulations and their bureaucratic complexity.
The association is particularly critical of the current discussion on the European Central Bank (ECB) potentially increasing the minimum reserve ratio. This comes after the ECB’s decision to no longer pay out interest on minimum reserves, which will lose European banks around 6.6 billion euros in the next 12 months. Increasing the minimum reserve ratio would further exacerbate the financial burden on banks and restrict their lending capacity. “We need a framework in Europe that gives banks more scope for lending, that simplifies capital market financing and that stimulates growth. So, in general terms, that means having regulation that allows us to achieve more,” said Christian Sewing.
At the same time, the Association of German Banks is convinced that the green transformation also opens up considerable opportunities for the banking industry. In the current year, around half of all sustainable bonds were issued in Europe and, in doing so, European banks achieved a global market share of 45 percent. “It is a matter of underpinning and building on Europe’s strength in sustainable financing,” said Christian Sewing. This goal must also be the focus of discussions about the future EU taxonomy in this area.