Report should include a list of “concrete” policy recommendations for the sector which the European Commission would then implement.
BRUSSELS — The EU should commission a Draghi-style report on the competitiveness of its banking sector, the finance ministries of France, Germany and Italy said in a joint note seen by POLITICO.
The finance ministries of the three countries — the EU’s three biggest economies — circulated the anonymous paper to national diplomats via unofficial channels.
Three diplomats confirmed its origins to POLITICO, saying the intention of the paper is to rally other countries to co-sign it before it is officially distributed.
Spokespeople for the three countries declined to comment on the paper.
France, Germany and Italy have been pushing for changes to the EU’s banking regime in recent months to boost the sector’s ability to compete internationally. In October, they called for pauses and changes to EU banking rules.
In the note, the three countries flag EU banks’ lower valuations compared to their American peers, declining market share domestically and in foreign markets, and limited scale which could hamper banks’ ability to invest.
Following Draghi’s example
Former European Central Bank head Mario Draghi wrote a landmark report at the European Commission’s request on how to stem the EU’s economic decline.
Draghi’s report, published in September 2024, will guide the new European Commission’s policy agenda for the next five years. The Draghi report included banking but had a high-level economic focus.
The purpose of the Draghi-esque banking report pitched by France, Germany and Italy would be to “provide the Commission, Member States, the European Parliament and the public with a unbiased diagnosis of the European banking sector, through the lenses of competitiveness,” the note says.
It could “investigate the economic reasons behind European banks’ lower competitiveness, » including business models and risk appetite, or external factors like fragmentation in the European banking market and its supervision or lower GDP growth.
The report, if commissioned, should include a list of “concrete” policy recommendations for the sector which the Commission would then implement, the countries say.
The scope of the report’s recommendations would “go beyond usual banking regulation topics and cover all topics deemed specifically relevant for the banking sector,” and should “be beneficial to the general public and to the financing of the European economy.”
The structure for drafting the paper could be set up in the first quarter of 2025, with an interim report delivered by the end of the year and the final version published by the end of June 2026, the note says. That would be in time for the next planned revision of EU bank capital rules in 2028.
It could be authored by a former European supervisor with support from an academic and a former banking executive, the note says.
Sore topics
The paper stresses that “this initiative should not be seen as a way to dismantle the difficult reforms completed in the past years.” However, that positioning may not convince other governments, given the three countries’ recent history of pushing for delays and changes to already-agreed banking rules.
The U.K. has delayed the rollout of global Basel banking reforms due to uncertainty over the U.S. government’s implementation of the standards under a Donald Trump presidency — a move seen by Brussels as participating in a regulatory race to the bottom.
French President Emmanuel Macron pushed for the EU to change its rollout of the rules last year, and the three countries said the EU should have a backup plan in case the U.S. did not implement the rules.
The EU did not change its overall package, but postponed elements on market risk by one year, and could postpone again or make further changes to that part of the rules.
Gregorio Sorgi and Giovanna Faggionato contributed to this report.
