Europe Needs Financial Power to Match Its Ambitions

Europe today finds itself at a critical juncture as it faces historic challenges, from an ageing population and the green transition to war at its doorstep and intensifying global competition. Meeting these challenges will require more than policy declarations. It will require money and the ability to mobilise it, channel it, and multiply it. In short, it requires a strong, competitive and autonomous financial system. Unfortunately, that is not what we have.

Finance is not just a technical support function; it is the bloodstream of any modern economy. Every new factory, electric vehicle, hospital expansion or clean tech startup depends on someone taking the risk to fund it. And in Europe, that "someone" is often a bank. SMEs, which make up 99% of EU companies, depend overwhelmingly on bank credit to grow, invest, and export.

Yet, the very institutions that form the core of our financing ecosystem are at risk of being outcompeted, overregulated, and sidelined.

Europe talks often about “strategic autonomy” in energy, defense, and digital infrastructure, but rarely is financial autonomy part of the conversation. It should be.

Today, over 60% of investment banking in Europe is handled by just four American banks. During the COVID-19 pandemic, many of these institutions scaled back their exposure to European corporates, leaving firms scrambling for liquidity. This dependence on non-European actors for capital markets services is not only inefficient, it is risky. In times of uncertainty, capital follows national priorities and European companies may once again find themselves at the back of the queue.

In addition, the regulatory playing field is tilted. The upcoming Basel IV rules will be applied in full in the EU, but not in the US, UK, or Japan. While well-intentioned, this asymmetry puts European banks at a competitive disadvantage, limiting their ability to lend, invest, and grow, just when Europe needs them most.

If we want European banks to step up and finance the twin transitions, support strategic sectors, and accompany our firms abroad, they must compete on equal footing.

We need scale and vision. European banks are often too small to compete globally. Scale matters, not just for profitability, but for resilience, innovation, and international reach. Mergers and acquisitions within the EU financial sector must be facilitated, not blocked by fragmentation or unnecessary hurdles.

Strong European banking champions are essential to support EU companies as they expand globally. They help firms navigate foreign markets, manage currency and regulatory risks, and access long-term funding. Without them, even the most competitive EU firms may find themselves disadvantaged abroad.

Europe needs to unlock its own capital. The Capital Markets Union must move beyond rhetoric and become a true single market for savings and investment. Retail investors must be empowered, cross-border flows facilitated, and equity financing made more accessible — especially for scale-ups and innovators.

To get there, we need more than regulatory simplification. We need smart, proportionate, and enabling regulation, frameworks that protect stability and consumers, but also unleash growth and competitiveness. This means:

• Proportionality, so regulation fits the size and risk profile of the actor,
• Technology-neutrality, so innovation isn’t boxed in,
• And outcome-based rules, so the system works in practice, not just on paper.

Encouragingly, the European Commission appears to be taking steps in the right direction. A long-awaited proposal to review the securitisation framework — a persistent demand from the financial sector — is finally on the table. This reform could help unlock balance sheet capacity in EU banks, freeing up capital to support more lending to households and businesses.

As Ana Botín, President of Banco Santander, recently proposed, the EU should also create an independent agency to advise the Commission quarterly on how to streamline regulation, guided by a “comply or explain” principle. These are exactly the kind of pragmatic ideas Europe needs.

Europe cannot afford to be naïve. In a world shaped increasingly by power politics and economic blocs, financial strength is sovereignty. The United States and China understand this. So should we.

To build the Europe we aspire to — competitive, resilient, sustainable, and socially cohesive — we must stop treating finance as an afterthought. It is time to empower the European financial sector to lead — with scale, with vision, and with the tools to compete.

Antonio Garcia del Riego, EESC Employers' Group Member and Rapporteur of Opinion ECO/665 Facilitating the financing of investments and reforms to boost European competitiveness and creating a Capital Markets Union.