Banks Fret Over the Impact of Digital Euro, Potentially Losing Up to €30 Billion
Banks may face a hefty expense of approximately €30 billion due to the introduction of a digital euro.
The dawn of the Digital Euro has sparked anxiety among banks in the Eurozone. A study supported by the European banking associations EBF, EACB, and ESBG estimates that the digital euro could burden banks with a whopping €30 billion, as reported by peak associations of the Sparkassen-Finanzgruppe and the cooperative financial group Volksbanken Raiffeisenbanken. They've voiced concerns that the existing concept of the digital euro doesn't offer any discernible benefits for consumers or businesses.
These lobbying associations are pushing for tighter collaboration with private initiatives in the European financial sector. The digital euro should serve as a meaningful complement to traditional central bank money, such as notes and coins, rather than replace it. Currently, an introduction is not expected before 2028, as the necessary legal frameworks are still under development, as confirmed by Bundesbank board member Burkhard Balz recently.
Banks are uneasy about the prospect of customers withdrawing a significant portion of their funds and moving to the digital euro upon its arrival. Financial institutions would then lose a crucial source of refinancing their loans, potentially hampering their ability to lend.
Joachim Schmalzl, a managing board member of the German Savings and Giro Association (DSGV), remarked, "A digital euro will only prosper if it offers practical, tangible benefits to all parties involved - and that can only be achieved with the banks." The current project design, as it stands, could stifle other innovation projects and bind resources for years.
Tanja Müller-Ziegler, a board member of the Association of German Volksbanken and Raiffeisenbanken (BVR), emphasized that the digital euro should not supplant existing private-sector systems but rather augment them where there's genuine value for all. Banks are open to innovation; they're willing to invest, but duplicative structures are not beneficial to customers. The digital euro should not erode the competitiveness of European providers.
Sources: ntv.de, RTS
Insights:- Anxieties about the digital euro's impact on bank competitiveness are widespread, with potential consequences for consumers, businesses, and the financial sector.- Banks aim to mitigate these challenges by integrating the digital euro into their existing systems, collaborating with fintechs, and adapting their business models to accommodate reduced intermediation roles, focusing on value-added services and efficient payment solutions.- The digital euro offers opportunities for banks to innovate and improve their services, potentially bolstering their competitiveness in the Eurozone. However, they must find the right balance between competing in the digital era and preserving the benefits their customers have come to expect from traditional banking services.
- The European banking associations EBF, EACB, and ESBG, along with others, are advocating for closer collaboration with private initiatives in the European financial sector, aiming to ensure that the digital euro serves as a meaningful complement to traditional central bank money, benefiting both consumers and businesses.
- Banks are exploring ways to adapt their employment policies to accommodate the digital era, with a focus on investing in innovation projects and value-added services, while preserving the benefits they offer to customers and balancing their competitiveness in the Eurozone.
