Unlocking bank capital key to boosting lending and growth in the real economy

• Layering of capital requirements has constrained banks’ ability to ensure capital flows efficiently to households, businesses and strategic EU priorities.
• Variations in the application of capital and macroprudential measures undermine the level playing field, disproportionately affecting smaller Member States such as Ireland.
• BPFI response to the European Commission’s consultation on the competitiveness of the EU banking sector calls for targeted reforms to the EU’s banking framework.

Friday 24^th April 2026 – More efficient use of bank capital and consistent application of EU banking rules, is required to unlock lending capacity for households and businesses and support economic growth, according to a submission by Banking & Payments Federation Ireland (BPFI) to the European Commission’s consultation on the competitiveness of the EU banking sector.

In its response, BPFI calls for targeted reforms to improve the effectiveness of the EU’s banking framework and deliver a level playing field for banks operating across the Single Market that does not disproportionately impact smaller countries, such as Ireland.

Commenting on the submission, Brian Hayes, Chief Executive of BPFI, said: “BPFI welcomes the Commission’s recognition that a stronger, more integrated banking sector is a key building block for a competitive European economy. The EU remains a largely bank‑based financial system, with banks playing a critical role in financing the real economy. Sustainable economic growth, therefore, depends on banks having the capacity to lend.”

“However, the cumulative layering of capital requirements since the financial crisis has added unnecessary complexity, with limited additional financial stability benefits. This has constrained banks’ ability to ensure capital flows efficiently to households, businesses and strategic EU priorities, including the green and digital transitions. Separately, wide variations in the application of capital and macroprudential measures across Member States undermine the level playing field within the Single Market, disproportionately affecting smaller Member States such as Ireland.”

Pointing to opportunities for reform, Mr Hayes added: “The sector is not calling for deregulation. Rather, we are advocating for a more effective and efficient regulatory framework, that preserves financial stability while reducing unnecessary complexity, supporting growth and enabling capital to flow where it is most needed across the Single Market.”

Mr Hayes concluded:

“European and Irish banks have demonstrated strong resilience in recent years. They are well capitalised, highly liquid and supported by materially improved underwriting standards, risk governance and supervision. The policy focus must now shift towards simplification, proportionality and deeper integration. Our response offers practical recommendations to strengthen competitiveness and support sustainable economic growth, and we look forward to continued constructive engagement with the Commission and other stakeholders.”

BPFI’s submission calls for a number of key priorities including to:

1. Streamline and simplify the regulatory framework.
2. Update the capital framework to ensure it accurately reflects underlying risk.
3. Embed genuine proportionality across the banking framework.
4. Complete the Banking Union to unlock scale and efficiency.
5. Ensure a level playing field within the EU and globally.
6. Support market liquidity and effective capital markets intermediation.

BPFI’s full submission can be downloaded here.