Summary of the Report
The report argues that the EU’s financial system—despite being far more stable than before the 2008 crisis—is now too conservative, too fragmented, and too small‑scale to support Europe’s long‑term growth, innovation, and competitiveness goals.
This is the heart of Sabatini’s argument: Europe’s financial challenge is no longer regulatory. It is institutional. And until Europe fixes the institutions that interpret, enforce, and operate its rules, it will never unlock the full potential of its savings, its companies, or its future.
Europe today lives inside a financial system shaped by the ghosts of past crises. After 2008 and the euro‑area turmoil that followed, policymakers built a fortress: thick walls of prudential rules, high capital requirements, intrusive supervision, and a Banking Union designed to prevent panic from ever returning. The fortress worked. Banks became safer, failures rarer, and the system more resilient. But as Giovanni Sabatini explains, Europe paid a price for this stability. The architecture built for crisis‑prevention hardened into a permanent structure, one that now weighs heavily on growth, innovation, and competitiveness.
Sabatini describes a continent where the rules are harmonised but the institutions applying them remain stubbornly national. Supervision is centralised, yet supervisors behave defensively, always more afraid of being blamed for a failure than praised for enabling growth. Courts, meanwhile, remain national, each with its own traditions, procedures, and interpretations. A bank supervised at the European level can still be judged by twenty‑seven different judicial systems. This mismatch creates uncertainty, encourages caution, and makes supervisors even more conservative. Europe ends up with a system where everyone tries to avoid mistakes, but no one feels responsible for enabling dynamism.
The same fragmentation appears in the machinery of the market itself. Trading may look European, but the plumbing underneath — clearing, settlement, custody — remains divided across countries, infrastructures, and legal regimes. Even when companies merge or platforms consolidate, the underlying rules do not. Liquidity cannot pool. Costs remain high. Scale never emerges. Europe has built a financial system that looks integrated from afar but behaves like twenty‑seven small islands up close.
This institutional misalignment creates what Sabatini calls a “structurally conservative equilibrium.” Europe is safe, but slow. Stable, but stagnant. It has savings, but cannot mobilise them. It has companies, but cannot scale them. It has rules, but not the institutions needed to make those rules work in a truly integrated market. Retail investors are encouraged to participate, but retail participation cannot fix structural fragmentation. Disclosure reforms cannot fix fragmented adjudication. New products cannot fix fragmented infrastructure. Europe keeps treating symptoms while the underlying condition persists.
Sabatini’s message is that Europe must rethink its priorities. Stability is essential, but stability alone is not enough. Growth, competitiveness, and innovation must become explicit objectives of supervision and regulation. Supervisors need mandates that recognise opportunity costs, not only downside risks. Courts need specialised capacity to judge complex financial cases. Market infrastructures need consolidation and unified oversight. And Europe must rediscover the importance of scale — including the strategic role of the United Kingdom, whose exclusion imposes a hard ceiling on Europe’s market depth.
The report ends with a choice. Europe can continue with defensive integration, preserving stability but limiting dynamism. Or it can pursue “dynamic resilience,” a model where prudential soundness coexists with scale, investment, and long‑term growth. The Savings and Investments Union will succeed only if Europe aligns its institutions, not just its laws. Without institutional alignment, Europe will remain formally integrated but functionally fragmented — a continent with rules but without a market.
