In his presentation, Ulrik Nødgaard noted that the debate on bank regulation often centres on the need for simpler rules and stronger competitiveness. Danmarks Nationalbank supports initiatives that can make the rules simpler, better targeted and more proportionate. This includes more consistent regulation across the EU and simpler requirements for smaller, non-complex institutions.
“But regulatory simplification must not be confused with deregulation,” says Ulrik Nødgaard. “We must preserve the core of the financial regulatory framework. Capital, liquidity and resolution requirements should not be eased.”
At the same time, Ulrik Nødgaard added nuance to the debate on whether European banks face a heavier capital burden than US banks and that capital requirements prevent banks from financing sound projects.
When comparing competitive conditions, it is crucial to focus on banks that actually compete with each other in the same markets. Analyses by, among others, the ECB indicate that large European banks are generally not more heavily capitalised than comparable US banks.
Danmarks Nationalbank also assesses that Danish institutions are not capital-constrained. The largest Danish banks have ample lending capacity to meet the increased investment needs described, among other places, in the Draghi Report.
Banks play a central role in financing creditworthy companies and productive investments. However, particularly risky projects and start-ups need equity financing from investors, funds and the pension sector with a greater appetite for risk. Stronger and more integrated capital markets therefore also play an important role in financing Europe’s investment needs.
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