First session: Key drivers of bank competitiveness – with a deep dive into the capital stack
Tackling bank competitiveness has become a pressing issue in the EU. Despite decades of financial integration efforts, barriers to competition between financial institutions persist at the national level. Since the financial crisis, the EU has pursued the objective of a single rulebook to reduce regulatory fragmentation and ensure a level playing field. However, the sector has started to operate under a substantial regulatory burden, while a truly integrated banking market remains incomplete. Furthermore, capital levels have started to increase without a clear benchmark, undermining Europe’s investment needs.
One proposal gaining increasing attention is the introduction of competitiveness as a secondary objective for financial supervisors. In theory, this would help to anchor policy priorities and improve the coherence of regulatory design, but defining competitiveness remains a significant stumbling block. Diverse interpretations exist, and without agreed indicators there is a risk of reintroducing regulatory competition. A sound framework of quantifiable, macro-level indicators would be essential to assess whether the EU financial sector is falling short on competitiveness.
To facilitate high-level discussion on these issues, CEPS is organising a series of three meetings in cooperation with the Nordic banks. These meetings will bring together a select group of market participants, EU and national officials and independent experts. The discussions will be informed by the CEPS task force report ‘More finance, less friction’, which sets out concrete recommendations for improving the EU’s financial rulemaking and supervisory framework.
For more information on the series, read the concept note.
This meeting will explore the challenges and drivers of bank competitiveness with a particular focus on the structure and implications of the capital stack. Bringing together senior practitioners, regulators and market experts, the session will dive into the current capital stack to unpack how different layers of capital – CET1, AT1, Tier 2 and MREL/TLAC instruments – affect banks’ cost of capital, lending capacity and ability to support the real economy.
Against the backdrop of ongoing implementation of Basel III, EU-specific requirements and the current buffer regime, the session will assess whether the cumulative regulatory framework remains proportionate and internationally competitive. Particular attention will be given to the impact of capital composition on banks’ ability to finance the green transition, digitalisation and strategic investments in Europe.
The meeting aims to contribute to the broader policy discussion on how to ensure a resilient banking sector that can compete globally while effectively channelling financing to households and businesses across the EU.
