Villeroy de Galhau: Supervision must simplify, boost competitiveness
Banque de France Governor François Villeroy de Galhau reviewed a decade of banking supervision, calling for simplification and increased competitiveness in the European financial sector. He highlighted progress since 2015 and outlined new challenges including climate, digital, and geopolitics.
From crisis to robust resilience
The period from 2015 to 2025 marked a significant shift from post-crisis recovery to enhanced resilience in the European financial sector.
Prudential reforms, notably the finalisation of Basel III in 2017 and its transposition into European law (CRR 3, CRD 6) by June 2024, have substantially strengthened the framework.
French banks, for instance, saw their CET1 ratios rise from an average of 12.5% in 2015 to 15.6% by the end of 2025.
Similarly, insurance undertakings increased their Solvency Capital Requirement coverage ratio from 226% to 250% over the same period, navigating both prolonged low and rapidly rising interest rates.
This enhanced resilience has been consistently validated by rigorous stress tests, with the 2025 EU-wide tests showing French banks maintaining regulatory requirements even under severe adverse scenarios (e.g., 6.4% GDP contraction).
The sector has successfully withstood unprecedented shocks, including the Covid-19 pandemic, the war in Ukraine, the 2023 banking crisis outside the EU, and a highly unstable geopolitical environment.
This robust capitalisation suggests no further general capital requirements are needed.
Uncertainty's new faces
The past decade introduced four profound developments.
Brexit, ten years ago, led to significant financial institution relocations to continental Europe, bringing over EUR 220 billion in assets to Paris.
Climate-related challenges intensified, with the ACPR pioneering global climate stress tests and contributing to NGFS work.
The digital revolution accelerated, bringing MiCA regulation for crypto-assets, active preparation for a digital euro, and cybersecurity becoming a systemic risk.
Finally, the return of geopolitics, marked by increased rivalries, underscores the need to preserve international standards and enhance European financial and technological sovereignty.
Beyond vigilance: A call for agility
The significant progress in banking and insurance safety now warrants a shift in supervisory focus.
While maintaining security, the emphasis must move towards simplification and competitiveness, adopting a pragmatic, risk-based approach.
Completing the Banking Union, particularly by facilitating cross-border mergers, is crucial for shared European sovereignty and prosperity.