When the von der Leyen II Commission took office on 1 December 2024, a new five-year regulatory phase began. But a number of major issues inherited from the previous period remain on the table. Antoine Kremer, who is responsible for European affairs at the Luxembourg Bankers’ Association (ABBL), the Association of the Luxembourg Fund Industry (Alfi) and the Association of Insurance and Reinsurance Companies (Aca), cites three issues that “should be resolved by the summer of 2025.” They are:
- the Retail Investment Strategy (RIS), an by making financial products more transparent, accessible and fair, while limiting abusive commercial practices in this sector;
- the crisis management and deposit guarantee framework (CMDI);
- the framework for access to financial data (Fida).
Is the RIS driving away retail investors by trying to protect them better? That is what the financial world continues to fear in the face of requirements which, it says, could discourage long-term investment--particularly for retirement. This initiative adds new obligations to existing ones, such as the suitability tests already carried out to assess the needs, risk appetite and knowledge of savers. Banks, asset managers and insurers are particularly critical of the way benchmarks are calculated as part of the “value for money” test. This test mainly compares costs and performance, but neglects what is essential in their view: customer needs.
Currently on hold, discussions between representatives of the member states and the European Parliament are due to resume in the coming weeks. Kremer advocates, at the very least, an adjustment of the RIS in the light of the (which “calls for a review of the regulations to avoid damaging European competitiveness against the United States and China”) and in a context marked by a new European Commission more focused on simplifying the rules. In his view, it would even be wise to consider suspending the negotiations in order to take a step back and, potentially, come back with a reworked draft. “The current text has become so complex and unsatisfactory that even the European authorities responsible for financial markets and securities complained about it in a letter to the co-legislators in November.”
Medium-sized banks: a framework to be reviewed
Initially designed for large banks, the current framework for managing banking crises has proved ill-suited to medium-sized institutions, points out the financial centre’s Brussels representative. “Some member states have circumvented the European framework to rescue banks in difficulty, raising questions about the integration of medium-sized banks into this system. The current situation undermines the effectiveness and credibility of the resolution system.”
The CMDI reform seeks to , a thorny issue. Proposals using national deposit guarantees have met with opposition in the European Parliament and the Council. The proliferation of “zombie banks,” artificially kept in business, is also complicating this long-running debate.
Financial data: controversial access
The Fida regulation aims to , such as financial information service providers. Kremer relays the scepticism of the associations he represents. “This obligation represents a high cost for banks and insurers, with no clear benefits. For small and medium-sized banks, the business case is particularly uncertain. The introduction of these rules could in fact benefit only providers of financial information services.”
Other points of attention in 2025 include the PSD/PSR reform (Payment Services Directive and Regulation), the main objectives of which are to improve consumer protection and competition, and to combat fraud. While the European Parliament has already adopted its position, the European Council has yet to finalise its own. “Debates are still open on the key issue of liability in the event of fraud between banks, telecoms operators and platforms,” points out the representative of the financial community.
Finally, there is the T+1 regulation on the . The European Commission is due to present legislation to reduce this time to one working day by 2027 for all instruments in the EU and the UK. This model, which has already been adopted in the United States, is synonymous with increased liquidity constraints and also represents a competitive challenge for Europe. “The question is not whether the EU will adopt T+1, but whether we will be ready. This is a particularly thorny issue for our investment funds, which are distributed all over the world and are subject to significant time differences. A repurchase in Hong Kong may take place there in the morning, while the financial markets are still closed in Europe,” notes Kremer.
By relaunching securitisation, banks can free up their balance sheets.
These ambitious reforms entail significant risks for the financial centre. Increased costs and complexity could weigh on the competitiveness of local players, affecting retail savers and investors. “The challenge will be to strike a balance between consumer protection and economic efficiency. Regulatory simplification and better coordination between players are essential to preserve the European dynamic and Luxembourg’s central role,” sums up the lobbyist for the ABBL, Alfi and Aca.
The European Commission is currently preparing its work programme, marking the start of a new five-year regulatory cycle. A cycle that the financial world would like to see placed under the banner of competitiveness and capital markets union (renamed “savings and investment union”), a founding project aimed at mobilising private savings in the service of the EU's objectives.
To develop this union, Kremer insists on two avenues. “We need to encourage individuals to invest to prepare for their retirement, by offering them suitable products. This means providing people with clear information about their retirement prospects. Another approach is to revive securitisation, i.e., the transformation of illiquid assets--such as mortgage loans--into financial securities that can be traded on the markets. This could enable banks to free up their balance sheets and finance the economy more.”
Competitiveness: intentions and actions
Competitiveness is presented as a priority by the European Commission and its president Ursula von der Leyen. In her mission statement, she calls on the new financial services commissioner, Maria Luís Albuquerque, to focus on “ensuring the competitiveness of the financial sector.”
Kremer applauds the intention, but expects action. One example is the implementation of for banks. “This will . While the European Commission and regulators remain committed to the strict application of these rules, the United States is considering relaxing them, or even abandoning them altogether.”
This article was originally published in .