Can banks finance the EU's strategic priorities?

The European Union faces a historic investment challenge. The green transition, digitalisation, and higher defence spending require around €1.2 trillion in additional investment annually. A large share of this investment will need to be privately financed, with banks likely to play an important role. This DNB analysis shows that prudential reforms have increased the resilience of the banking sector and help address market failures. Although influencing bank financing, prudential regulations do not constitute a substantial obstacle to banks’ ability to support Europe's investment ambitions. The solution to mobilising more private financing therefore lies not in easing prudential requirements, but in improving risk sharing, further integrating financial markets, and strengthening the European capital market.