MADRID/LONDON, June 9 - Europe is contending with an expanding annual investment shortfall of €1.4 trillion, according to the European Banking Federation, a figure that the industry says could hamper key policy goals including the region's energy transition. That estimate was elevated from previous calculations of €800 billion in 2024 and €1.2 trillion in 2025, based on analysis by consultancy Oliver Wyman commissioned by the EBF.
The EBF attributes the gap to growing funding needs across a set of strategic areas, notably energy, defence, digitalisation and industrial capacity. In a banking system where lenders supply roughly 65% of financing to the real economy - a much larger share than in the United States - the federation argues that regulatory frictions are constraining banks' ability to meet those needs.
Industry representatives have pushed national and EU-level policymakers for simplification of the regulatory framework. France and Germany have publicly urged the European Commission to advance what they call an ambitious "financial services simplification package" to make rules easier to navigate and less burdensome for banks.
Regulators have signalled some limited steps in that direction. In April, the European Banking Authority set out measures aimed at easing supervisory reporting and cutting administrative burden on banks. In December, the European Central Bank proposed streamlining certain rules while explicitly maintaining overall capital requirements, a stance that drew criticism from lending institutions for not delivering looser capital constraints.
The EBF argues that targeted simplification and better coordination among regulators could free up additional lending capacity without dismantling post-crisis safeguards. The federation calculates that an extra €150 billion of bank lending could cover roughly 20% of Europe’s incremental financing need, and that a 1% reduction in CET1 capital requirements would release around €95 billion.
Beyond simplification, the EBF called for accelerated work on deepening capital markets and completing the banking union, including establishment of a common deposit insurance scheme. The European Commission is due to publish an assessment of banking sector competitiveness in July, with legislative proposals anticipated in 2027.
The federation also notes broader political pressure on regulatory regimes internationally. It says some countries, particularly the United States, are pushing to reduce regulation and relax capital rules to stimulate growth, and that banks have long viewed supervision as increasingly onerous.
Exchange rate used in the analysis is $1 = 0.8668 euros.