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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 ...

This paper provides an assessment of the EU banks’ competitiveness by using the US as a benchmark and looking at four interconnected dimensions: profitability, stability, ability to supply intermediation services and raise funds, product affordability for customers. Our results show that profitability, while being a key performance indicator in a market economy, does not measure the banks’ contribution to welfare more broadly and may even signal excessive market power.

This paper reviews a recent data on property markets and real estate-related bank loans in the euro area, looking at prices, mortgages, credit quality measures and some indicators of the costs faced by borrowers. It then takes a closer look at certain origination and monitoring practices adopted by significant institutions, as recently analysed by the ECB, which apparently show some room for improvement. Finally, it addresses property-related exposures held by non-bank financial institutions, with ...

This paper outlines the European Union’s institutional framework for defining and executing an active euro exchange rate policy, against the backdrop of a potential policy shift by the United States. It outlines the emerging US debate on linking exchange rate policy with trade and security objectives and provides a background on past currency interventions by US and other central banks such as the Plaza Accord. The final part opens a discussion over the functioning and limits of the EU’s legal framework ...

On 19 March 2025, the European Commission unveiled its strategy for a savings and investments union with the goal of directing EU households' savings towards productive investments. This policy includes a review of existing EU pension legislation to increase participation in supplementary pensions and recommendations for auto-enrolment pension frameworks. The pan-European pension product (PEPP), introduced in 2019 through a regulation that became applicable in 2022, has only been registered in four ...

The European Central Bank (ECB) is the central institution of the Economic and Monetary Union, and has been responsible for monetary policy in the euro area since 1 January 1999. The ECB and all EU national central banks constitute the European System of Central Banks (ESCB). The primary objective of the ESCB is to maintain price stability. Since 2014, the ECB has been responsible for tasks relating to the prudential supervision of credit institutions under the Single Supervisory Mechanism.

This briefing has been prepared for the public hearing with the Chair of the Single Supervisory Mechanism (SSM), Claudia Buch, scheduled for 27 March 2025 in the ECON Committee. The previous hearing took place on 18 November 2024.

In this paper, we propose and analyse four scenarios of a second Trump administration’s economic policy and its impact on Europe, ranging all the way from moderate tariffs to full trade war, a full multilateral breakdown with the US leaving the IMF down to a more cooperative exchange rate realignment agreement. We assess two trade scenarios quantitatively and outline broader policy shocks and their economic consequences. Our findings highlight significant challenges for the ECB, requiring responses ...

This briefing report evaluates the ECB's monetary policy in a context of declining inflation and stagnant growth. Inflation risks have been averted and, after a period of relatively tight policy in 2024, benchmark comparisons indicate that the current interest rate is consistent with the ECB's mandate. The prevailing economic and inflation outlook supports further rate cuts. However, the high level of economic policy uncertainty necessitates cautious adjustments. Moreover, official ECB communications ...

Were the US to impose large and lasting tariffs on its imports from the EU, the effect on the euro area (EA) would be substantial and far-reaching. We expect the direct impact to be inflationary in the US and contractionary on EA aggregate demand and output. The indirect impact through an appreciation of the dollar (partly already occurred) tends to transfer inflation from the US to Europe. The ECB should be mindful that both deflationary and inflationary influences may ensue, and be ready to adjust ...