Resilience and sustainable growth must align in European banking
A Bank for International Settlements speech stresses that sustainable growth and bank resilience are mutually reinforcing. Two decades after the global financial crisis, Europe requires further structural reforms to overcome market fragmentation and operational risks.
Digital risks and geopolitical pressures
Europe’s banking sector has strengthened its resilience over the past decade, lowering the probability and severity of financial distress while ensuring reliable service provision.
However, structural headwinds persist across the European Union.
Economic expansion remains constrained by geopolitical tensions, a fragmented Single Market, and a complex institutional setup.
Concurrently, emerging risks threaten stability as geopolitical fallout reaches bank balance sheets over time.
Rapid digitalisation creates opportunities to adjust business models but introduces severe operational vulnerabilities, particularly cyber threats that demand continuous investment in IT architecture and cybersecurity to safeguard core operations.
Avoiding the false trade-off
Maintaining balance sheet resilience remains essential to protect deposits, keep payment systems operating, and ensure steady lending during market disruptions.
Policymakers argue that growth and safety are not mutually exclusive but represent two sides of the same coin.
The European Commission’s report on banking competitiveness provides an opening to resolve these structural challenges and reinforce both dimensions simultaneously across the single market.
Old dilemmas, slow progress
Linking competitiveness directly to resilience correctly reframes a stale regulatory debate.
Yet diagnosing fragmentation without concrete legislative harmonisation offers little immediate relief for European lenders.
True progress will depend on breaking the political stalemate around the completion of the banking union.