"As banks, we are particularly committed to improving the conditions for market-based financing"
Expert commentary by Wim Mijs, Chief Executive, European Banking Federation
During the 10 years since the financial crisis, Europe has undergone many changes and many reforms which have allowed its economies to get back on track. Still, this picture is tainted by the different challenges Europe faces, together with the global challenges of digitalisation and climate change which put its economic and political well-being at risk. Creating the conditions for dynamic, sustainable and inclusive economic growth in Europe has never been more important.
The financial sector has a unique role and responsibility for creating these conditions. Finance exists to enable growth, and to fund companies that will inspire Europe and beyond. It is not merely a bundle of risks that must be regulated and supervised appropriately.
Banks in their key role as the main financiers of the real economy have long-standing experience of serving the needs of companies of all sizes and sectors, it is a role that will remain important even as they adapt to changes in technology, global company needs and market and business structures.
Against this backdrop, the 3,500 European banks the European Banking Federation represents in 32 countries are more committed than ever to the Banking Union and the Capital Markets Union, and specifically to the goal of bridging the investment gap in Europe, estimated to be €700bn per year. The European Investment Bank is tackling it, but the rest must come from the private sector through a large-scale, efficient and dynamic mobilisation of resources across Europe. As banks, we are particularly committed to improving the conditions for market-based financing, in which banks play a key role as intermediaries.
Bank lending accounts for 56% of European firms’ external investment – 75% if we take into account all other forms of bank financing. Banks remain committed to meeting diverse company needs, but they can only achieve their funding potential if the regulatory framework is conducive and poses no undue burdens.
Bank loans remain the most relevant form of external financing for 48% of the European small and medium-sized enterprises (SMEs). We are reassured to see that access to finance is currently not cited as a concern for European SMEs, which now increasingly face the challenge of hiring people with the right skills.
However, we cannot be complacent. Together with representatives of SME associations, we aim to improve the structural conditions that determine SMEs’ access to bank lending as well as other forms of finance. In that spirit, we just celebrated the first anniversary of the agreement to provide feedback to SMEs whose loans have been declined by banks. Fostering this initiative while also supporting others in areas like financial education is, and will remain, our focus.
European banks are ready to take on these challenges, providing innovative and imaginative solutions that will help companies to adapt and to thrive. We all owe it to future generations to be creative and proactive in finding new solutions to meet the needs of our societies today and tomorrow.