Financial sector news

Banks continue to play a central role in the eurozone, both in financing the real economy and in transmitting monetary policy. This was stated by Isabel Schnabel, member of the Executive Board of the European Central Bank, during a symposium in Amsterdam dedicated to the end of Klaas Knot's term as president of the Dutch central bank.

Stability built after the crisis

According to the ECB representative, the eurozone banking system has strengthened significantly since the 2008 global financial crisis.
Banks' capital levels are now more than double their pre-crisis levels, and liquidity remains well above minimum requirements. This has allowed banks to act as “shock absorbers” rather than sources of shock.

It was thanks to post-crisis reforms that the banking sector was able to maintain lending to businesses and households even during the COVID-19 pandemic, when the economy experienced its sharpest decline in output since World War II, as well as during the unprecedented cycle of interest rate hikes in 2022–2023.

Banks — the foundation of financial stability

Isabelle Schnabel emphasized that banks remain the main pillar of financial stability in the euro area, ensuring a stable flow of credit to the real sector and effective transmission of monetary policy. In recent years, European banks have demonstrated their ability to withstand global shocks, thanks in part to more diversified funding, interest rate hedging, and balanced asset management.

The ECB believes that deregulation is premature and risky at this stage. On the contrary, high capital requirements do not reduce competitiveness but increase efficiency:

“A bank with a CET1 ratio of 18.5% is approximately two percentage points more efficient than a bank with 13.5%,” Schnabel noted.

New risks outside the banking sector

Despite the strengthening of banks, Europe's financial system faces new challenges. In particular, the share of non-bank financial institutions (NBFI) in total lending has grown from 12% to 30% over two decades, indicating a shift of risks to a less regulated environment. In addition, only 20% of banks account for about 90% of credit and 95% of financial links with non-banks, which increases the concentration of risks.

The rapid growth of digital assets and stablecoins is an additional factor.

Following the entry into force of the EU Regulation on crypto-assets (MiCAR) in 2023, deposits from crypto exchanges and stablecoin issuers in euro area banks rose from less than €1 billion in 2024 to over €6 billion by mid-2025. According to Schnabel, if the trend continues, this segment could become systemically important. The ECB also warns that stablecoin issuers already hold about 3% of the US short-term debt market, which poses potential risks to global financial stability in the event of “forced sales.”

European course: integration and digital sovereignty

The ECB sees the future of Europe's financial system in deeper integration and technological development. Key initiatives include completing the banking union, harmonizing reporting (IReF), and introducing the digital euro, which, according to Schnabel, will allow banks to maintain their leading role in Europe's payment infrastructure.

“A strong European economy means strong banks that are able to finance the real sector and remain the foundation of a stable financial system,” concluded Isabel Schnabel.