Montagner: EU banking integration key to competitiveness

Patrick Montagner highlighted that European banks play a unique role, financing over 90% of euro area GDP, which necessitates robust, forward-looking supervision.

Drawing lessons from past crises, from Bankhaus Herstatt in 1974 to the global financial crisis, he stressed that banks critically depend on confidence.

Weak governance, inadequate risk management, and complacency about liquidity can quickly erode this.

The GFC specifically taught that light supervision repeatedly fails and fragmented rules are dangerous.

Europe's common regulatory and supervisory framework, built post-2008, has proven effective, with strengthened capital positions and reduced non-performing loans (from 7.5% in 2015 to 1.9% today).

Profitability has also recovered to 9.5% ROE in Q4 2025.

Montagner emphasized the need to preserve these regulations, adapting them without dismantling the framework.

Montagner addressed the debate on capital requirements, noting that evidence does not support the conclusion that EU banks are structurally disadvantaged by systematically stricter rules than international peers.

Recent ECB analysis and other studies confirm this, finding no disproportionately high supervisory requirements or negative link between capital and profit efficiency.

Therefore, Europe's banking competitiveness challenge cannot be primarily diagnosed as a capital stringency problem.

While calibration questions merit attention, the focus must shift beyond capital stringency to other structural issues.