Europe needs €750 billion to €800 billion in additional annual investment through 2030, a speech published by the Bank for International Settlements said, citing the Draghi report.
Public funds alone cannot cover investment in artificial intelligence, energy supply and decarbonisation alongside defence spending. The BIS published “Stable banks, strong capital markets - Europe’s financial system for the future” on Nov. 3 in its central bankers’ speeches series.
The speech argued that Europe’s fragmented banking and capital markets hinder financing by making it harder to direct money efficiently and reduce costs through scale. It contrasted those conditions with the United States, where banks benefit from integrated financial markets with more readily available buyers and sellers.
European banks retained strong capital and liquidity in 2026. It cited the spring 2023 banking turmoil, when strains spread to European bank shares and bonds but remained limited and short-lived in the euro area.
The speech rejected the argument that excessive capital explains European banks’ lower profitability. It cited European Central Bank and Bundesbank studies finding that higher capital ratios reduce interest expenses and earnings fluctuations, helping banks borrow more cheaply.
The speech backed the EU’s Savings and Investments Union, an effort to connect savings with business investment across national borders. Deeper equity and venture capital markets could help European start-ups grow, while giving businesses access to a wider range of investors.
Banks could also benefit from a larger securitisation market, which packages loans into securities sold to investors. Transferring risks to investors could free capital for new lending. The speech cited the European Commission’s June 2025 proposal to reform that market.
Completing Europe’s banking market also requires common deposit insurance and easier management of capital and liquidity across borders. It qualified that argument by calling for safeguards to ensure foreign parent banks support their subsidiaries during crises.
Greater integration should preserve different banking models, because smaller institutions can bear disproportionately high regulatory and administrative costs. It supported simpler rules while arguing that reforms should preserve banks’ ability to withstand financial shocks.
The speech described proposals under which small, low-risk banks would face fewer requirements based on assets’ assessed risks, in exchange for holding more capital against total assets. The European Central Bank’s simplification task force recommendations had entered the European reform process.
The European Commission plans to propose changes to the banking framework in the first quarter of 2027, including simplification measures. The supplied text ends before the conclusion is complete and provides no detailed study period or dataset for the cited research.
