Financing Europe’s future: challenging five common misconceptions

Europe’s competitiveness, innovation, security and green transition all require substantial investment. According to a recent study by Oliver Wyman, commissioned by the European Banking Federation (EBF) and its members, Europe’s additional annual investment needs now amount to approximately €1.4 trillion.

As policymakers discuss how to finance these ambitions, several misconceptions continue to shape the debate. The report Bridging the Gap: Financing Europe’s Future seeks to bring greater clarity to the discussion.

Misconception #1: Europe lacks savings

Reality: Europe does not suffer from a shortage of savings.

European households held around €37 trillion in financial assets in 2023. The challenge is not the absence of capital, but ensuring that savings can be channelled efficiently towards productive investment.

According to the report, Europe needs a financing ecosystem capable of connecting savers, banks, capital markets and investors more effectively.

Misconception #2: Banks are no longer central to financing the economy

Reality: Banks remain at the heart of Europe’s financing model.

While deeper capital markets are an important objective, the report stresses that banks and capital markets are complementary, not competing, sources of finance.

Banks originate assets, assess risks, support businesses and households, and help connect investment opportunities with investors. Strengthening Europe’s financing capacity therefore requires both competitive banks and stronger capital markets.

Misconception #3: Europe’s investment gap can be closed through public funding alone

Reality: Public resources alone will not be sufficient.

The scale of Europe’s investment needs far exceeds what public budgets can realistically finance on their own. Private capital will play a critical role in supporting investment across strategic sectors such as energy, digital infrastructure, innovation and defence.

The report argues that Europe must create the conditions for private financing to complement public initiatives.

Misconception #4: Competitiveness and resilience are opposing objectives

Reality: Europe needs both.

The debate is sometimes presented as a choice between maintaining a resilient banking sector and strengthening competitiveness. The report rejects this binary approach.

A resilient financial system is essential for long-term stability and confidence. At the same time, regulation and supervision should be designed in a way that allows banks to continue supporting growth and investment.

The challenge is therefore not to choose between resilience and competitiveness, but to achieve the right balance between the two.

Misconception #5: More regulation automatically means better outcomes

Reality: Effectiveness matters as much as quantity.

The report highlights how successive layers of regulation, supervisory requirements and market fragmentation can reduce banks’ capacity to finance long-term investment.

Its recommendations do not call for abandoning prudential safeguards. Instead, they advocate a framework that remains robust while avoiding unnecessary complexity and ensuring that regulation effectively supports Europe’s strategic objectives.