The Role of Banks in Europe's Financial System

How do banks feature in current attempts to strengthen Europe’s competitiveness, resilience, and financial sovereignty? This lecture argues that the answer goes beyond regulatory simplification, let alone deregulation. The Great Financial Crisis exposed the fragility of Europe's banking system and led to major regulatory reforms as well as the creation of the (still incomplete) Banking Union. Against that background, the lecture examines the current framework with a focus on proportionality in regulation, resolution, and deposit insurance. It also considers how the changing relationship between banks and non-banks affects liquidity risk and financial stability, the implications of geopolitical risk, and the role of safe assets in Europe's financial architecture. Finally, the lecture points towards ways how Europe can build a banking framework that is both more integrated and more resilient.