Financial regulation and growth: what should be the European policy priorities?

Speech by Mr Fernando Restoy, Chair, Financial Stability Institute, at the FinSAC Conference "Financial sector stability in times of geopolitical turbulence", Vienna, Austria, 27 May 2025.

There is no compelling evidence that tighter prudential regulations after the Great Financial Crisis have had a disproportionate impact on banks' lending capacity or the macroeconomy. However, there is scope to improve certain aspects of the current framework. In particular, authorities could consider simplifying some requirements and rebalancing the combination of across-the-board regulations and tailored supervisory actions in favour of the latter. There is also a clear public policy case to strengthen the regulation of non-bank providers of financial services by introducing adequate entity-specific requirements.

In Europe, it would be worthwhile to explore the extent to which the complexity of the institutional framework for banking regulation could impose excessive compliance costs on European banks. However, the main policy priority for fostering the efficiency and profitability of the industry remains promoting an integrated banking system. This requires removing political obstacles for cross-border consolidation and taking more decisive steps to complete the banking union.