Escrivá: Europe needs less regulation, more housing

Banco de España Governor José Luis Escrivá called for a reduction in European banking regulation and highlighted the severe housing shortage in Spain. In an interview with Expansión, he also discussed potential mortgage limits and the ECB's recent rate hike.

Beyond the Rulebook: Europe's Regulatory Overload

Banco de España Governor José Luis Escrivá criticized Europe's "proclivity to regulate," leading to an excessive volume of rules from the European Banking Authority (EBA) and national supervisors.

He highlighted a lack of democratic legitimacy in some rule-making processes, advocating for a correction of the existing regulatory "stock" and a new approach to future legislation.

Escrivá also addressed the absence of cross-border banking consolidation, attributing it to an incomplete banking union and unharmonized commercial laws.

He argued for the necessity of "European champions" in investment banking, currently dominated by North American firms, while expressing doubts about large-scale consolidation in retail banking, where regional banks offer closer client proximity and better credit access.

Navigating the Housing Dilemma

Escrivá announced an upcoming White Paper on macroprudential measures for mortgages, emphasizing the need for "surgical" parametrization due to their intrusive nature.

He warned of potential negative impacts on inequality, young people, and low-income individuals, and the risk of shifting demand from ownership to rental.

Spain faces a severe housing shortage, with an estimated deficit of 750,000 homes, primarily due to regulatory bottlenecks across local, regional, and national administrations.

Escrivá also noted issues in the construction sector, including low productivity and labor shortages, suggesting public support for construction and long-term rental solutions to address accessibility for vulnerable groups.

Prudence in a Complex Landscape

Governor Escrivá's remarks reveal a central bank deeply engaged with structural challenges, from regulatory overload to a severe housing deficit.

His call for precise, well-analyzed policy interventions, particularly on mortgage limits, reflects a cautious approach to avoid unintended social consequences.

This comprehensive perspective highlights the complex interplay between micro-level issues and broader macroeconomic stability.