“In Europe, there is too much talk about competitiveness and not enough action” – Slawomir Krupa, president of the European Banking Federation
Tuesday 27th May 2025 – French media outlet, Les Echo, last week published an interview with Slawomir Krupa, the new president of the European Banking Federation. In a wide-ranging discussion, Mr Krupa touched on European competitiveness, regulations, capital requirements, the Green transition and the impact of the new US administration on the EU.
Below are transcribed excerpts from the article:
Slawomir Krupa, President of the European Banking Federation, warns about the impact of banking regulations on growth in Europe, at a time when Trump’s America is embarking on sweeping deregulation.
The global economy is going through a major period of uncertainty. What is your perspective?
The new international environment is causing significant disruptions. We have to adapt. Europe’s fundamental problem is our growth. Over the past two decades, we’ve significantly fallen behind most other economies. Honestly, I’d really like us to focus on solving this fundamental structural issue. There is too much talk about competitiveness and not enough action.
We’ve focused too much on resilience at the expense of growth. That applies to all sectors, and especially to banking, because nothing in the European economy can happen without banks. Policymakers and supervisors should work to unlock some of the capital frozen in the system to free up growth. Discretionary supervisory decisions [from the ECB and other supervisors – Ed.] have helped freeze hundreds of billions of euros in additional capital over the years, which equates to over €1 trillion in financing capacity.
Banks can be the bridge to close the €800 billion investment gap in Europe identified in Mario Draghi’s report.
Mario Draghi says banks are unable to finance breakthrough innovations. Should European regulators be less strict about capital requirements?
I think Mr. Draghi is referring to seed capital, which carries the highest level of risk. But any development and significant growth requires leverage and bank financing. No one in Europe is advocating deregulation. But we must address regulatory overinflation within a highly complex “capital layer cake” system imposed on banks by multiple national and European authorities. This leads to double counting, increased complexity, and makes the system harder to manage.
There have been 13,000 new regulations in Europe over the last five years, compared to 5,500 in the United States. Financial law now spans 15,000 pages. Over the last five years, supervisors have imposed additional capital requirements on most banks. We’re conducting an analysis on this topic to be published in a few weeks.
The total capital of the 15 largest European banks is around €700 billion, and today 40% of that comes from discretionary macro- and micro-prudential requirements. That means a large portion of capital is frozen, as these discretionary measures and add-ons have accumulated over recent years—up to about €100 billion. Often, this doesn’t even improve resilience.
What has been the impact of Donald Trump’s presidency on the financial sector so far?
There is more uncertainty in the system and markets are more volatile. Our role is to navigate this riskier environment effectively and manage our risks well while supporting our clients. As seen in the Q1 results of European banks, we’re doing just that. There are also opportunities for our sector because clients increasingly need us to handle flows and provide hedging products.
Moreover, macroeconomic conditions will be affected by an investment pause while trade negotiations play out. Supply chain structures will evolve. Everyone will have to adapt.
This “reset” in the U.S. could lead to divergence in financial regulation. How should the EU respond?
The first step is awareness. There are clear signs that Basel III won’t be fully implemented in the U.S., except to maintain neutrality on capital requirements. At a time when Europe is strategically reflecting on its competitiveness, why would we choose to favor American players? Why allow a major divergence in the regulatory framework? Why should we force ourselves to operate with the handbrake on?
It’s also a matter of strategic autonomy and reducing dependency on non-European banks, especially in an economy reliant on bank financing.
European banks have shown more resilience, whereas we’ve seen regional bank failures in the U.S.…
I’m not saying resilience is bad, but it shouldn’t be the only strategic objective. We must evolve our view of risk. Frankly, a zero-risk state means death. You can’t have growth—significant long-term growth—if you don’t take risks. It’s a question of balance.
Regarding Basel III, do you think the EU will again postpone the FRTB rule for market activities?
Implementing the FRTB rule [market activity prudential rules – Ed.] in the current context would seem very odd to me. The signals we’re getting—though one must always be cautious—are that its entry into force could be postponed to give regulators, supervisors, and banks more time to reflect on its final implementation.
Remember that the FRTB can’t be completely removed without new European legislation. The discussion now is about how to implement this regulation long-term without increasing capital requirements. That would make sense—especially if Europe is the only jurisdiction applying it.
Are you satisfied with Omnibus, the European Commission’s simplification initiative?
The Commission sees it as a first step. We need to go further and ensure that all new regulations serve a clear objective and focus on resilient growth—not stagnation or mere recession avoidance. That mindset shift is desperately needed.
The Capital Markets Union has been on the table for years. Do you think the new Franco-German tandem can speed up the talks?
Awareness on this issue has grown in Europe. And I hope both leaders take note of my key point on capital requirements and the opportunity to unlock Europe’s full potential. In discussions about the union of savings and investment, we too often overlook a fundamental fact: Europe lacks capital.
We can simplify regulations. We can even create another supranational regulator. But in the end, the problem remains: where will the money come from? Europe has few pension funds, due to the structure of most retirement systems and also a cultural preference for liquid, low-risk investments.
In the long term, it’s about mindset, culture, financial literacy, and education. But first, the priority should be to reform the regulatory framework for insurance companies, because that’s where some capital would initially come from, as well as from securitization. There have been ten years of hesitation on this issue.
What’s your view on government intervention in Italy or Spain to block bank mergers?
As president of the European Banking Federation, it’s not my place to make judgments or promote a particular structure. There is still an unresolved duality between different regulators in Europe. Many capital inefficiencies in cross-border banking operations remain while we wait for the full implementation of the Banking Union. It’s up to policymakers to address this and create the conditions for a functioning single market—if that’s the strategic intent.
As a citizen, more than as a banker or FBE president, I believe we should ensure conditions for Europe to thrive through effective integration.
Green finance is another area of divergence. Should European banks stay the course despite American banks stepping back?
I don’t think U.S. banks are abandoning ESG. They’re adjusting their messaging, but I don’t see any of them launching new coal financing projects. The reality on the ground is more nuanced. No European bank sees ESG as a competitiveness issue.
We all believe it’s a fact and a necessity to finance many innovations, infrastructures, and production capacities—especially in renewable energy. It’s a challenge we’re fully prepared to meet.
Excerpts translated from French and taken from the original article: L’état de risque zéro, c’est la mort: pour Slawomir Krupa, la résilience des banques ne peut être le seul objectif de l’Europe | Les Echos by Ingrid Feuerstein and Dominique Seux
Mr. Slawomir Krupa, CEO of Société Générale, assumed his role as President of the European Banking Federation (EBF) on 1 March 2025, a non-executive role traditionally taken up by an active CEO of a major international European bank. The European Banking Federation serves as the voice of the European banking sector, representing national banking associations from across Europe. Its members collectively comprise some 3,500 banks, including the largest commercial banks in the region.
