The aim is to convey to the future European Parliament and European Commission the sector's vision of the banking agenda for the next legislature

Priorities focus on streamlining the regulatory burden and achieving a more level playing field for the different stakeholders in the financial sector in order to avoid the risk of regulatory arbitrage

In a financial landscape shaped by digital transformation and the surge of sustainability as a strategic pillar, the European banking sector faces the need to simplify and streamline the regulatory framework in an environment of high regulatory pressure, which leads to high compliance costs. In this context, CECA and CaixaBank organised an event yesterday at the Brussels headquarters of the European Savings and Retail Banking Group (ESBG) to present the document Priorities of the CECA sector for the new EU legislative cycle 2024-2029, a report that reflects on the strategic pillars of the next banking agenda ahead of the forthcoming European Parliament elections.

The conference was opened by Manuel Galarza, Director of Compliance, Control and Public Affairs, and member of the CaixaBank Steering Committee, who reviewed the main issues relevant to the sector with a view to the next European legislature, highlighting the need for efficient, practical and coherent regulation.

The document is structured according to the key challenges facing the sector in the coming years: digital transformation, sustainability, taxation and the Banking Union.

Digitalisation and sustainability, the banking sector's greatest challenges for the future

The unstoppable advance of digitalisation in the financial sector brings with it new challenges that require attention from European institutions. One of the most relevant is the digital euro, a project that could have important implications for financial stability and the financing of credit institutions. The CECA sector calls for the need to delimit its scope, restricting its applications to a means of payment for transactional purposes only, and setting clear limits on the amount of digital euros that can be held by each customer.

At the operational level, emerging technologies require a robust regulatory framework to address cybersecurity risks. Ultimately, in the case of digitalisation, it is essential to strike a balance between innovation and security.

In the field of sustainability, the growing regulatory intensity has generated a series of very demanding obligations that sometimes present inconsistencies that make it difficult for financial institutions to implement them. In view of this situation, it is necessary to establish a roadmap with attainable milestones, based on clear regulations that facilitate the adaptation and implementation of this new paradigm. Similarly, given the difficulty for banks to have detailed knowledge of their customers' activities, more protection and balanced regulations are needed to avoid accusations of "greenwashing".

Banking Union, a great opportunity to pull together

As far as the EU Banking Union is concerned, the European Deposit Insurance Scheme (EDIS) has not been implemented, although it is a prerequisite for a genuine union and for reducing the link between sovereign and banking risks. Along these lines, Luis Teijeiro, Director of Regulation and Research at CECA, highlighted during his intervention: 'The CECA sector urges the new EU Commission and Parliament (where the first steps are already being taken with a new proposal) to pool their efforts to move the Banking Union project forward during the new legislature, which will probably involve working on a pragmatic approach to EDIS'.

Taxation

In 2022, a temporary tax on the extraordinary profits of Spanish banks was approved. The ECB warned of the consequences of this levy on the capital position of lenders, monetary policy and real economic growth, as well as its impact on competition in the domestic market and on the level playing field of Spanish institutions in the EU and internationally.

Despite this warning, its extension to 2024 was confirmed last December, as well as the government's intention to make it permanent. In this context, the CECA sector argues that these levies should be withdrawn or, if not, it considers it necessary to promote a European framework to harmonise the different approaches, avoiding discrimination between entities, economic sectors and jurisdictions.

Undue distortions to the normal functioning of markets

In an increasingly complex and diversified environment, legislators tend to increasingly regulate prices, a practice that can have significant negative implications for competition and innovation. Benchmarks under the Retail Investment Strategy (RIS) or interest rate caps under the Consumer Credit Directive are examples in this regard, and they reflect the complexity of imposing price controls due to national specificities, product or service-specific qualities or consumer preferences. Faced with this challenge, the CECA sector advocates avoiding the use of price control regulation, focusing the regulatory strategy on ensuring efficient market functioning.