Boosting Europe’s Financial Competitiveness

According to the report “Embedding financial competitiveness as a regulatory objective to boost Europe’s productivity”, produced by CEPS, ECRI and Deloitte, the EU needs a more competitive financial system to narrow its productivity gap, specifically when compared to the US. Europe´s economy will not reach its full growth potential without a more competitive financial system capable of mobilizing capital towards innovation, digital transformation, and the green transition. A central contribution of the report is the call for Europe to formally integrate competitiveness into regulatory mandates, supervisory practices and accountability mechanisms. The report also proposes a comprehensive financial sector´s competitiveness measurement framework and a set of policy recommendations to strengthen its contribution to European productivity.

Main takeaways of the report:

• Competitiveness as a prerequisite for European growth. The report highlights Europe’s persistent productivity gap with the US and its weaker capacity to finance innovation. A regulatory framework focused almost exclusively on stability does not encourage sufficient capital allocation to strategic sectors. Introducing competitiveness into regulatory mandates would help rebalance stability, consumer protection and long-term growth.
  
  The authors define financial competitiveness through four dimensions:
  

1. Financing capacity (savings, market depth, venture capital).
2. Profitability and value creation (bank efficiency, ROE, fund costs).
3. Resilience (solvency, asset quality, loss-absorbing capacity).
4. Market participation and digitalisation (listed companies, banking concentration, digital usage, payment infrastructure). This framework is translated into 28 measurable KPIs for annual monitoring.
   

• Embedding competitiveness into regulation and supervision. The report recommends giving European supervisors (EBA, ESMA, EIOPA, ECB-SSM) a secondary competitiveness mandate, mirroring approaches in the UK or Singapore. It also calls for strengthened impact assessments, integration of competitiveness into supervisory processes and annual KPI-based monitoring. 
  
  
• Other proposals included in the report to help close the gap with the US:
  
  
  • Deepening capital markets by harmonising insolvency regimes, improving infrastructure, and scaling institutional investor participation.
  • Mobilising long-term savings through pension reform and incentives.
  • Accelerating digital integration in payments.
  • Completing Banking Union to enhance efficiency and enable meaningful cross-border consolidation