ECB Urged to Boost European Banks’ Competitiveness, Says Deutsche Bank CEO

During a recent conference in Frankfurt, Deutsche Bank AG CEO Christian Sewing called on Europe’s top banking regulator to broaden its mandate. Sewing said the European Central Bank (ECB) should look beyond just financial stability and help European banks stay competitive globally.

He pointed out that the US Federal Reserve and the Bank of England already factor competitiveness into their regulatory playbooks. Sewing’s message really reflects the growing anxiety among European banks about falling behind international rivals.

The Need for Competitiveness in European Banking

Sewing’s comments get at a real problem for European banks. Sure, financial stability matters, but banks also need to compete—otherwise, what’s the point?

Right now, the regulatory focus leans heavily toward safeguarding the system, sometimes at the cost of competitiveness. This could leave European banks playing catch-up with their US and UK peers, who deal with a more balanced set of rules.

Financial Stability vs. Competitiveness

The ECB has mostly concentrated on keeping the financial system steady. They’ve pushed for strong capital reserves and managed systemic risks.

But Sewing warns that focusing only on stability can hold back innovation and growth. If regulators also think about competitiveness, banks might have more room to innovate and expand—and maybe even boost their global reputation.

Lessons from the US Federal Reserve and the Bank of England

The US Federal Reserve and the Bank of England seem to have found a way to blend competitiveness with stability. This approach helps keep their financial systems solid, yet still gives banks space to grow and innovate.

Sewing thinks the ECB should take a page from their book to keep European banks in the game.

Regulatory Balance

Regulations need to be strong but not suffocating. The US Federal Reserve, for instance, uses a mix of tools to watch over stability while still encouraging banks to try new things.

The Bank of England combines regulations with incentives to help banks stay competitive. If the ECB adopts some of these ideas, maybe it could strike a better balance too.

The Economic Implications

If European banks can compete, the whole economy stands to gain. Strong, competitive banks lend more and invest more, which drives growth.

They’re also more attractive to international business. On the flip side, if banks can’t compete, the whole region risks stagnation.

Boosting Innovation

When banks compete, they’re more likely to try out new technologies and services. That kind of innovation can push the industry forward.

Customers benefit too, with better and more efficient financial services. Who doesn’t want that?

The Role of the ECB

The ECB really shapes the future of European banking. If it expands its mandate to include competitiveness, it could help create a more dynamic sector.

That would likely support broader economic growth and stability across Europe.

Policy Recommendations

Sewing suggests a few steps for the ECB to consider:

• Incorporate Competitiveness Metrics: Add competitiveness measures to the ECB’s framework so banks can hold their own globally, not just stay afloat.
• Foster Innovation: Give banks reasons to invest in new tech and services—let them push the envelope a bit.
• Encourage Cross-Border Collaboration: Get European banks working with international peers to swap ideas and spark innovation.
• Flexible Regulation: Build rules that are tough but not rigid, so banks can grow and still keep things stable.

Conclusion

Christian Sewing wants the ECB to expand its mandate and focus on competitiveness. He thinks this is a big issue for European banks.

He points out that the US Federal Reserve and the Bank of England offer some lessons. Maybe the ECB could build a more balanced approach, supporting both stability and growth.

If you’re curious and want to dig deeper, the full article’s on Bloomberg’s website here.