Stepping up to challenges, building a resilient Europe 

The EU has faced two black swan events in the past years: the Covid-19 pandemic and the war in Ukraine. During the Covid crisis, banks helped families and businesses navigate the unexpected and proved to be solid and reliable partners for Europe’s regulators and authorities. The Russian invasion of Ukraine has now triggered a devastating humanitarian crisis and ushered in a new economic and geopolitical reality. The aftershocks of Russia’s attack continue to reverberate across Europe and the world, including the banking community.

Looking to the future, the situation will remain challenging. According to the latest forecast by the European Commission, growth in the EU economy will be lower, and inflation higher. Now more than ever, our focus must be on building a resilient economy that serves all businesses and people. To help finance this, banks need a future-focused regulatory framework and rules based on a clear, long-term vision that serves the needs of European citizens and economy.

Standing with Ukraine  

Over 8 million people have been displaced within Ukraine and over 6 million people fled to neighbouring countries. The European banking sector took immediate action to provide support to Ukraine and its people.

“European banks have stood firmly with Ukraine and its people from the first days of the Russian invasion. We helped those fleeing to EU countries open bank accounts and has waived fees on transfers to Ukraine to help refugees and others sending money home. Our sector has also contributed to the humanitarian relief efforts and will continue to do so. Banks in every single European country are united in implementing the sanctions against Russia, working closely with policymakers. We will continue to play our role, and we will continue to offer support for Ukrainians suffering the consequences of Russia’s attack for as long as it is needed,“ said EBF President and Banco Santander SA Executive Chair, Ana Botín.

To ensure effective implementation, it is important that sanctions are clear, consistent, and converging across main jurisdictions, notably the EU, UK, and US.

A clear path towards a sustainable transition

By accelerating its sustainable transition, Europe will both meet its climate objectives and help bolster its economic resilience and security. The flow of fossil fuel financing by European banks is decreasing in 2021 compared to previous years. They are also increasing financing to help companies take the necessary steps towards the green transition. Understanding that time is of the essence, this must be done in a responsible way to avoid sudden economic and societal disruptions, while meeting climate objectives in the future. To set transition strategies, banks need clarity and certainty of government policies and transition pathways in the short and medium-term. Finally, regulatory actions across different areas, including prudential, disclosure, investment services, and others should be consistent, well-coordinated and prioritised.

Putting capital at the service of businesses and people 

European industries require significant funding to support the sustainable transition. The upcoming decisions that policymakers will make about the Banking Package will determine the capacity to meet the challenges the European economy is facing. European banks have piled up a stack of capital, above 15 per cent core equity ratio. Excess regulatory capital requirements will prevent banks’ capital from being used where it is needed the most – to fuel European businesses and service citizens.

A digital euro that creates value for consumers and economy

The importance of digital financial services has been highlighted by the pandemic lockdowns, while the strategic role of cybersecurity and digital operational resilience both for financial institutions and non-bank actors in the ecosystem has never been more pronounced than after the invasion of Ukraine. And this is against the backdrop of the rise and growth in cryptocurrencies.

In this context of fundamental rethinking of banking for the digital era, central banks all over the world are also looking into the changing role of money in a digital financial ecosystem where the use of cash is decreasing and new types of virtual assets are emerging. The European Central Bank’s (ECB) investigation into a digital euro points to a forward-looking approach and banks are prepared to contribute to this study, in identifying opportunities, risks and best solutions.

We look forward to discussing with the ECB how the digital euro will fit the successful payment solutions that European banks already offer. In parallel, we are keen to help identify the design options which will lead to a digital euro that preserves financial stability, with in-built protection features such as threshold solutions (caps); does not weaken bank funding and capital; is value-creating for end-users and the economy; does not crowd-out private innovation in payments or duplicate investments; is secure and resilient; safeguards users' privacy, and allows intermediaries access to transaction data for compliance requirements and the development of innovative services for customers.

The creation of CBDCs (Central Bank Digital Currencies) can have far-reaching consequences. The EBF has been actively contributing to the public debate from the beginning and remains committed to continue doing so, both at the strategic and the technical level. 

Financial skills for a resilient society 

As Europe navigates through the challenges ahead, financial literacy must remain a top priority. Financial skills lie at the heart of a resilient and inclusive society, capable to withstand difficult times. That’s why the EBF and its members dedicated this year’s European Money Week to supercharging Europe’s financial skills. While financial education is important for all ages, making sure young people have the right skillset is crucial – and teenagers certainly have an appetite for financial knowledge – the 2022 edition of the European Money Quiz has attracted 50 000 players from 29 countries across Europe.

Banks will continue to do their part in supporting Europe’s goals and helping overcome challenges our region may face. Wim Mijs, EBF CEO said: “Our sector has the power to finance a better future for all, but we need the right rules in place that will help us harness it. As we take concrete steps toward this future – whether it is a sustainable transformation or a digital currency – we must ensure we have a common objective of a resilient, secure Europe in mind. We stand ready to contribute to the policymakers’ and regulators’ vision and chart the best way forward.”