Germany, France, Italy call for easing EU banking regulations

Germany, France, and Italy are urging the European Union to adopt a more restrained approach to financial regulation, emphasizing the need to enhance the competitiveness of the banking sector.

In a joint letter addressed to the EU’s director general for financial services, the leaders of these three major economies requested that existing rules be eased to create a “level playing field” with other global jurisdictions, Caliber.Az reports via foreign media.

They also recommended that the next European Commission avoid initiating any large-scale financial reforms in the near term.

This plea comes amid growing concerns about excessive regulation potentially harming the EU's competitive edge. French President Emmanuel Macron recently warned that overregulation could further diminish the bloc's standing in the global economy. Meanwhile, the US has scaled back its proposed banking reforms from the Basel Endgame, and the UK has introduced more favourable rules compared to earlier proposals.

The letter highlighted a need for greater emphasis on the banking sector's competitiveness, noting that recent initiatives aimed at reversing Europe’s economic decline should also consider financial regulations. A spokesperson for the European Commission confirmed receipt of the letter, indicating that the next commissioners will address these concerns.

However, this push for deregulation faces opposition from key global regulators who caution against a shift away from strict financial oversight. They argue that maintaining robust regulations is essential to prevent future financial crises and to address emerging risks, such as instability in the Middle East and the potential issues in shadow banking.

Nicolas Véron, a regulation expert, stressed the importance of maintaining adequate bank capitalization to safeguard the EU economy, despite bank lobbyists’ calls for relaxed capital requirements.

The letter identifies six areas of focus for the upcoming commission cycle, including adjustments to capital reform proposals and a reevaluation of the “green asset ratio” that assesses the sustainability of banks' portfolios. The three countries are pushing for a preliminary report on banking competitiveness to be completed well before the EU's planned review by 2028.