Simplifying Europe's bank rules could unlock €2 trillion in lending, industry says

By Jesús Aguado

MADRID, June 19 (Reuters) - Europe's banking sector could boost lending by more than €2 trillion ($2.2 trillion) if regulators were to simplify rules while maintaining financial resilience, the head of Spanish banking association AEB, Alejandra Kindelan, said on Friday.

AEB and fellow associations CECA and UNACC flagged that regulatory complexity and overlapping capital requirements were constraining banks' ability to finance growth.

They estimated that simplification could increase lending by around €250 billion in Spain alone and help lift GDP growth in the euro zone.

Regulators globally are weighing easing the burden on banks to support competitiveness and economic growth, though European banks have been primed not to expect major changes after the European Central Bank earlier proposed streamlining rules without easing overall capital requirements.

A European Commission assessment of banking sector competitiveness is expected in July, with legislative proposals likely to follow in 2027.

The FT, citing a draft European Commission report, reported on Friday that the EU was set to remove barriers preventing banks from moving funds across the bloc.

Bank of Spain Governor Jose Luis Escriva told a financial event in Madrid that "removing barriers" that fragment EU banking markets was key to unlocking cross‑border integration and boosting lending.

"But this requires completing the banking union, with clear safeguards to ensure parent banks support subsidiaries in times of stress," Escriva said.

The chairman of BBVA, Carlos Torres, and Santander CEO Hector Grisi warned that weak investment and regulatory fragmentation risked eroding Europe’s competitiveness.

"Without (investment), the region risks falling behind, particularly in fast-moving areas such as technology, energy and defence," Torres said.

Europe's banks last week also urged simpler rules to help them finance growth after saying that Europe faced a widening €1.4 trillion ($1.62 trillion) annual investment gap.

(Reporting by Jesús Aguado, editing by Victoria Waldersee and Andrei Khalip)