Montagner prioritizes banking resilience over lower capital demands

Patrick Montagner, Member of the Supervisory Board of the ECB, defined European banking sector competitiveness by its resilience and capacity to continuously provide services to the economy, mitigating stresses from losses and uncertainties.

He emphasized avoiding service reductions that could increase crisis cyclicality, a lesson from 2008. Montagner dismissed calls to embed undefined 'competitiveness and growth objectives' into supervisory mandates, asserting that economic growth stems from the labor market, investment, and innovation, not banking regulation.

He firmly rejected linking lower capital requirements with lending conditionality, emphasizing capital's primary role is to ensure system safety and resilience.

Montagner clarified that credit restriction in the EU is not due to prudential regulation, but rather borrowers' repayment capacity, a point supported by recent bank lending surveys.

Montagner addressed concerns about a level playing field between EU and US banks, noting that comparisons often focus on global systemically important banks (G-SIBs) and overlook fundamental regulatory differences in areas like mortgages and tax regimes.

He acknowledged that specific market activities might present competition issues, but stressed the need to demonstrate these without compromising resilience.

To move past the debate on capital requirements, Montagner emphasized fact-based, non-arbitrary supervision.

He highlighted the SSM's strong supervisory system, acknowledging past criticisms of bureaucracy.

Efforts are now focused on streamlining processes and concentrating on main risks, as detailed in the 'Streamlining supervision, safeguarding resilience' report.