Speaking at a Financial Sector Advisory Center conference last week, Fernando Restoy, Chair of the Financial Stability Institute (FSI), challenged a growing narrative that stricter regulation is holding back the European banking sector.
While acknowledging the case for simplifying certain requirements, Restoy rejected the view that post-crisis reforms have fundamentally impaired banks' ability to support economic growth. "I believe the claim that the post-crisis prudential framework is significantly undermining banks' businesses has yet to be convincingly substantiated," he argued. If anything damages economic growth, he emphasized, it is financial crises, not regulation.
Instead of deregulation, Restoy pointed to three concrete priorities on which European policymakers should focus: simplifying capital frameworks, strengthening oversight of non-banks, and — most critically — advancing European banking integration. He identified persistent fragmentation and political resistance to cross-border mergers as obstacles to scale and efficiency.
Restoy also highlighted regulatory asymmetries that allow non-bank firms — including large tech players and private funds — to operate outside banking rules despite posing systemic risks. "There hasn't been sufficient policy action to introduce entity-based requirements," he argued, calling for a more level playing field across financial service providers.
"[T]he financial industry is navigating a challenging period due to critical developments, including technological disruption, which is reshaping the competitive landscape, and tighter regulations aimed at safeguarding financial stability," Restoy said. "Policymakers certainly have a role to play in facilitating the industry's orderly adjustment to these new challenges. Regulation should aim to minimise unintended effects and, in particular, avoid creating unnecessary competitive distortions."
For more from Fernando Restoy, don't miss his contribution to our 2025 Compendium, coming this month. ▸ Learn More
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