Banking industry representatives in Spain contend that a reduction in regulatory complexity across the European Union could materially expand banks' ability to lend, without eroding sector resilience. Alejandra Kindelan, head of the Spanish banking association AEB, said on Friday that an easing of rules - implemented in a way that preserves financial strength - could allow Europe’s banks to boost lending by more than €2 trillion ($2.2 trillion).
The call for simplification comes as global and European regulators weigh adjustments intended to support bank competitiveness and economic growth. While some proposals aim to streamline the regulatory framework, officials have emphasised that overall capital requirements should not be watered down.
Spanish banking groups on Wednesday pressed policymakers to give competitiveness the same priority as stability. A joint report published by three Spanish associations - AEB, CECA and UNACC - argued that overlapping capital rules and regulatory complexity are constraining banks’ capacity to finance growth, even though the sector remains well capitalised and profitable.
The associations said a set of changes - including harmonising capital frameworks, improving coordination among national supervisors and reducing fragmentation across the EU - could raise efficiency without weakening safeguards. Their estimate suggests simplification would expand lending capacity by more than €2 trillion overall and add roughly €250 billion in lending in Spain alone. They also projected that such measures could lift euro zone GDP by 2.7%, a figure the groups note is substantially above the region’s average growth over the past two decades.
Separately, the Financial Times, citing a draft European Commission report, said the EU is preparing to remove barriers that currently inhibit banks from moving funds across the bloc. The European Commission itself is due to publish an assessment of banking sector competitiveness in July, with legislative proposals expected to follow in 2027.
Regulatory authorities have begun outlining targeted steps. Earlier this week, the European Banking Authority released what it described as "targeted" and "balanced" proposals to simplify the bank capital framework while maintaining the sector’s resilience. Industry representatives have also warned that Europe faces a widening annual investment gap of €1.4 trillion ($1.62 trillion), reinforcing calls for simpler rules to facilitate financing for growth.
Those advocating reform argue the focus should be on reducing unnecessary complexity and fragmentation rather than diluting capital buffers. Proponents say that better-aligned rules and enhanced supervisor coordination could unlock significant lending headroom, with measurable economic effects concentrated in the banking, corporate credit and broader euro area growth dynamics.
Summary
Spanish banking officials and industry associations say that regulatory simplification across the EU - implemented without weakening capital strength - could free more than €2 trillion in lending capacity, including about €250 billion in Spain, and raise euro zone GDP by 2.7%. The European Commission will assess competitiveness in July, with potential legislation in 2027, while the European Banking Authority has proposed targeted adjustments to capital rules.
Key points
- Simplifying capital frameworks and reducing fragmentation could expand bank lending capacity by over €2 trillion - impact sectors: banking, corporate borrowers, and macroeconomic growth.
- The Spanish banking associations estimate about €250 billion of additional lending could be mobilised in Spain specifically.
- Regulatory milestones include a European Commission competitiveness assessment expected in July and likely legislative proposals in 2027; the European Banking Authority has proposed targeted capital framework simplifications.
Risks and uncertainties
- Timing and scope of policy changes - legislative proposals are not expected until 2027, creating uncertainty for banks and borrowers - affects sectors reliant on near-term credit availability.
- Potential tension between simplification and maintaining robust capital requirements - policymakers have said overall capital levels should not be reduced, which may limit the extent of easing - affects bank balance sheets and regulatory strategy.
- Regulatory coordination and fragmentation issues may be difficult to resolve across EU member states, meaning projected lending gains may not be realised uniformly - impacts cross-border banking and investment flows.