Deutsche Bundesbank President Joachim Nagel said U.S. banks, and on some measures British banks, were ahead of European peers in net interest margins and price-to-book ratios, tying the gap to Europe's fragmented markets.
He made the comparison in a keynote in Frankfurt/Main on Oct. 21, focusing on where banks face international competition. Rivalry is less direct in local credit markets, he said, while European institutions meet more competition in investment banking and trading.
Nagel connected the U.S. position to deeper, more liquid capital markets and greater integration. He said those conditions support more efficient capital allocation and economies of scale. For Europe, he cited fragmented markets and national rules that can be complex or contradictory.
His proposed steps included harmonizing capital-market supervision, simplifying banking supervision and integrating European markets. Nagel said broader investor access could benefit European companies, while securitization could help banks make use of capital markets. He also noted that fixed regulatory and administrative costs can weigh disproportionately on smaller banks.
Nagel paired the case for stronger competitiveness with a discussion of resilience. He cited the 2023 banking turmoil as evidence of resilience and the global financial crisis as a warning about bank failures. Those examples framed market changes alongside the need to preserve oversight.
The European Commission was planning to propose amendments to the banking framework in the first quarter of 2027. Nagel proposed harmonizing capital-market supervision, simplifying banking supervision and integrating European markets as Europe considers those changes.
