The transformation of Europe’s financial system is based on three pillars: banking and capital integration, technological and monetary innovation, and the transition to sustainable finance. Together, these elements delineate the challenge of building a more stable and competitive Europe with the ability to address the world’s major economic and geopolitical changes.
As regards the Banking Union, it is important to underscore the urgent need to complete Europe’s financial architecture through an integrated single market and an effective capital union. After years of inactivity following the sovereign debt crisis, the European banking market is undergoing a new phase of consolidation. However, this process still faces significant obstacles resulting from the lack of standardized corporate and tax rules, along with a lack of political will to relinquish sovereignty in financial matters.
While regulatory and fiscal fragmentation, together with the lack of major pan-European operators, limit the competitiveness of the banking sector with respect to the United States and China, the lack of a European bond market comparable in size to that of the US is preventing the euro from becoming a truly global currency. A stable and liquid common European debt would be a key element in strengthening the system and encouraging long-term investment.
Against this background, artificial intelligence and digitalization are emerging as factors of efficiency and innovation. But they require common strategies and coordinated investments, and a watchful eye on the growing risks on the cybersecurity front. Another key issue is savings, which should be directed towards Europe’s economic and infrastructural development with a view to reducing dependence on foreign capital and enhancing the continent’s economic autonomy.
Turning to the cryptocurrency sector, a comparison between the US approach, which is geared towards expanding the crypto market to strengthen America’s global technological and monetary leadership, and the more cautious and regulated European approach, would be timely. Cryptocurrencies and stablecoins are an area of strong technological innovation, but also of potential instability. Blockchain technology can make payments more efficient, secure, and inclusive, and thus benefit groups currently excluded from the traditional financial system. However, the absence of an underlying asset and high volatility mean that many crypto instruments are speculative, with risks related to money laundering, fraud, and financial instability.
With the Markets in Crypto-Assets (MiCA) Regulation and the digital euro project, Europe’s aim is to balance innovation and security while protecting monetary sovereignty through rules governing transparency and mandatory reserves for stablecoin issuers. The digital euro is seen as a response to the challenge of private currencies and global payment platforms, the aim being to reduce dependence on international circuits. However, questions remain about privacy, technological competitiveness, and the impact of the digital euro on the traditional banking system. The future of the sector will therefore depend on the ability to balance regulation and innovation, develop credible and competitive euro stablecoins, and foster widespread digital literacy.
Amid the changes facing the sector, it is also important to highlight the outlook for sustainable finance and the key role that this segment plays in supporting the environmental and digital transition. Environmental, social and governance assets now represent nearly one quarter of assets under management globally, although the slowdown in inflows in 2024 has raised questions about the robustness of the process. Private capital is vital if the internationally agreed environmental and social targets are to be met, but finance cannot replace politics, which must guide transformation through taxation, incentives, clear rules, and international cooperation.
Hence the need to move from compliance-based finance to impact-based finance with the ability to generate measurable benefits for the environment, society, and governance rather than merely complying with formal standards. From an industrial and business perspective, companies are recognizing that sustainability is no longer just a marketing tool, but a measurable process for which both lenders and customers are expressing demand. However, excessive regulation risks penalizing European competitiveness and holding back SMEs, which need public incentives and protection from foreign competitors less constrained by ESG criteria. Although it poses challenges in terms of energy consumption and the climate impact of digital infrastructure, technology – if well governed – can be a powerful tool for monitoring and optimizing sustainability.