This study analyses why European banks, despite improved cost efficiency, continue to trade at lower valuations than their United States (US) counterparts. The gap stems from limited growth potential due to market fragmentation and underdeveloped capital markets. To close this competitiveness divide, the study calls for accelerating the Savings and Investment Union (SIU), expanding investment banking capacity, and implementing smart banking regulation and supervision that reinforces market discipline while enabling risk-taking within a stable, integrated European financial system. This document was provided by the Economic Governance and EMU Scrutiny Unit at the request of the ECON Committee.
How have European banks developed along different dimensions of international competitiveness?
ANdrea Resti
2025
Abstract
This study analyses why European banks, despite improved cost efficiency, continue to trade at lower valuations than their United States (US) counterparts. The gap stems from limited growth potential due to market fragmentation and underdeveloped capital markets. To close this competitiveness divide, the study calls for accelerating the Savings and Investment Union (SIU), expanding investment banking capacity, and implementing smart banking regulation and supervision that reinforces market discipline while enabling risk-taking within a stable, integrated European financial system. This document was provided by the Economic Governance and EMU Scrutiny Unit at the request of the ECON Committee.
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