European Banking Federation (EBF) director general Wim Mijs on Thursday sounded the alarm on the consequences of fragmented regulation in the European Union.

Mijs stated that over €1 trillion in inactive capital remains locked, limiting banks’ capacity to support the economy and threatening the EU’s ability to achieve its strategic goals.

Speaking at the general assembly of the Association of Cyprus Banks in Nicosia, Mijs described the current situation as “a story of two trillions”.

He explained that on the one hand, the EU needs to mobilise approximately €1 trillion annually to meet its green, digital, defence, and industrial ambitions.

On the other, nearly the same amount remains frozen due to regulatory inconsistencies across member states.

“This rigidity suffocates lending, stifles investment, and restricts banks’ ability to serve households, SMEs, and innovation,” he stated.

He also said that additional capital buffers increased by 60 per cent between 2021 and 2024, creating what he called “an invisible brake” on Europe’s growth.

Citing recent reports by Mario Draghi and Ursula von der Leyen, he warned that Europe’s aspirations may fail if its banking system remains trapped in rigid rules, while competitors such as the United States and the United Kingdom operate with greater flexibility.

“Resilience without proportionality is not strength, it is rigidity,” he stressed.

Moreover, he pointed out that capital requirements have already raised CET1 buffers by 67 per cent, tying up €273 billion which could support up to €4.1 trillion in additional lending.

Mijs welcomed the European Commission’s commitment to reduce regulatory burden by 25 per cent but added that “good intentions must be accompanied by actions”.

In addition, he called for the acceleration of rule simplification, particularly in the areas of ESG standards and sustainable finance.

On digital transformation, he expressed concern that the Financial Data Access (FiDA) proposal could disadvantage European banks.

Furthermore, he said that according to a PwC study commissioned by the EBF, the introduction of the digital euro could cost banks up to €18 billion over the next four years.

Mijs urged technology platforms and telecommunications providers to take greater responsibility in tackling online fraud.

He also called for banks to be exempt from overlapping rules under the new Cyber Resilience Act (CRA).

Regarding the new European Authority for Anti-Money Laundering (AMLA), he proposed establishing a high-level dialogue between supervisory authorities and banking compliance officers to strengthen trust and cooperation.

“Europe does not need more regulation. It does not need less regulation. It needs better regulation,” he said.

Furthermore, the EBF chief executive stressed that what Europe now needs is “unity instead of fragmentation, clarity instead of complexity, and bold implementation rather than endless discussions”.

This, he said, is the “path to transforming resilience into competitiveness and ambition into real opportunity”.