Banks, insurers push EU regulators to focus on economic growth, not just stability

Top executives from Europe’s largest banks and insurance companies are pressing officials in Brussels to add economic growth as a key responsibility for financial regulators, arguing the current system puts too much emphasis on stability at the expense of competitiveness.

The head of Zurich Insurance Group, Michel Liès, has urged European Commission president Ursula von der Leyen to copy what Britain did when it gave its financial watchdogs a similar growth-focused duty several years back.

Industry group argues stability and growth can coexist

“The fact that London has reacted a little bit quicker than Brussels is probably due to the complexity of Europe — but we just want to make sure that we put that on the table,” Liès said in an interview. “If we don’t address these urgent issues in the continent of Europe it will be too late.”

Liès, who runs Switzerland’s largest insurance firm, made the call representing the European Financial Services Round Table, a powerful industry group that includes top leaders from 24 major banks and insurers across the region.

The group makes the case that keeping the financial system stable and helping it compete globally are goals that can work together.

“Competitiveness and stability are not mutually exclusive: both are essential if Europe is to compete on the global stage,” the appeal states. It asks for the EU’s six main financial oversight bodies to receive clear instructions to promote both growth and competitiveness.

Right now, European financial regulators have one main job: keeping the financial system stable. According to the industry group, this single focus has created problems.

“European regulators and supervisors have been given one statutory objective: financial stability,” Liès wrote. “Stability has too often become a justification for adding new layers of requirements without assessing their impact, effectiveness or cumulative cost burdens that inevitably fall on our clients.”

The appeal points out that most other developed regions take a different approach. Britain changed its rules in 2023, giving its two primary financial regulators additional duties to support economic growth and competitiveness. Since then, government officials have regularly asked these agencies to demonstrate how they are meeting this goal.

“The UK’s regulatory experience — where the sector has been included as a priority in the industrial strategy and competitiveness recognised as a legitimate objective alongside stability — offers a model ambition for Europe,” Liès wrote.

The push from the European Financial Services Round Table shows growing frustration among banking and insurance executives with how slowly regulatory changes happen in Brussels. Many worry they are falling behind American competitors, where rules are being relaxed more quickly.

Currently, EU financial regulators must concentrate on keeping the sector stable and protecting customers. Industry leaders say this setup encourages officials to keep piling on complicated rules without thinking about whether these regulations might hurt economic growth.

The round table represents major financial institutions including BNP Paribas, Barclays, Santander, Allianz, Deutsche Bank, UBS and ING. The group argues that giving regulators an official growth and competitiveness mandate would make them more answerable to the European parliament.

Legislative changes needed as support grows

Making these changes would require new EU laws to alter the mandates of several regulatory bodies, including the European Securities and Markets Authority, the European Banking Authority, the European Insurance and Occupational Pensions Authority and the European Central Bank.

However, the idea is gaining support. Last month, European finance ministers asked the Commission to look at improving the mandates of EU financial regulators, including the ECB’s Single Supervisory Mechanism that watches over the biggest banks, to increase accountability.

The Commission responded by saying EU regulators currently concentrate mainly on the stability and effectiveness of the financial system. It noted that a planned reform of the European Securities and Markets Authority, which is similar to Britain’s FCA, did not include giving the agency a competitiveness mandate, though some small improvements are being considered.

The Commission has plans to release a report about the competitiveness of Europe’s banking sector later this year.

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