European ethical banks display stronger capital stability than traditional banks

European ethical banks display stronger capital stability and superior credit quality compared to significant banks while channeling the vast majority of their loans into environmental and social projects, Il Sole 24 ORE reported after a study debuted at Milan’s Festival dell’Economia Critica.

Ninth Report on Ethical Finance in Europe Released at Milan Festival

The findings come directly from the 9th report on ethical finance in Europe, a comprehensive study curated jointly by Fondazione Finanza Etica and the European Federation of Ethical and Alternative Banks, known as Febea. The research was officially presented in Milan during the Festival dell’Economia Critica, an event promoted by Fondazione Feltrinelli. According to the data, 98.36% of the credit extended by ethical banks goes directly to activities possessing explicit environmental or social purposes. This starkly contrasts with the primary European banks analyzed in the study, which direct just 18.5% of their funds toward similar sustainable goals.

The report highlights the massive economic weight of the social economy sector across Europe. This specific segment encompasses more than 4.3 million distinct organizations and provides jobs for approximately 11.5 million people. Despite this substantial footprint, the study warns that these social economy entities continuously face severe hurdles when attempting to acquire the financial resources required to grow, invest, and innovate.

Growth of Assets and Lending Rates Across Twenty-Six Financial Institutions

Europe currently hosts 26 distinct ethical banks managing combined assets exceeding 120 billion euros while holding over 90 billion euros in customer deposits. These operational metrics reflect significant expansion over recent years, considering that total assets sat at just over 51 billion euros back in 2018. Ethical lenders allocate a substantially higher percentage of their collected deposits directly into loans when contrasted with traditional banking institutions, dedicating 67% of their total collection to credit compared to the 61% average recorded among conventional banks.

The study highlights a clear divergence in how financial institutions chose to deploy their expanded revenues following recent interest rate hikes. While rising rates boosted operating income across the entire banking sector, major conventional banks primarily funneled their higher profits into shareholder dividends or engaged in mergers and acquisitions. Conversely, ethical lenders directed a much larger portion of their incoming revenues toward strengthening internal balance sheets, expanding physical presence in local territories, increasing staff resources, and distributing a higher proportion of added value directly back to their clients.

Febea Proposals for Regulatory Proportionality Ahead of EU Budget Negotiations

To foster better market competitiveness, Febea issued concrete policy proposals during the Milan presentation. The federation formally requested that European regulators recognize and safeguard the diversity of the financial sector, ensuring that medium-small intermediaries rooted deeply in local regions receive equal protection alongside massive banking groups. Febea emphasized that these smaller entities remain critically oriented toward financing the real economy, small and medium enterprises, and the broader social economy.

Another central demand focuses on making the legal principle of proportionality truly effective across the European Union. This involves applying regulatory obligations that match the actual size, operational complexity, and specific risk profile of individual banks rather than imposing monolithic rules. Elaborating on these policy recommendations, Federica Ielasi, vice president of Banca Etica, outlined the sector’s stance regarding upcoming legislative milestones.

Non chiediamo nuove risorse, ma più stabilità, coerenza e co-progettazione. In vista del negoziato sul bilancio Ue 2028-2034, è fondamentale trasformare le garanzie pubbliche – a partire dal rafforzamento di InvestEU – in strumenti permanenti e prevedibili. Servono criteri d’accesso che valorizzino l’impatto sociale e ambientale, una regolamentazione bancaria davvero proporzionata per gli intermediari radicati nel territorio e lo sviluppo di strumenti di capitale di lungo periodo. È solo così che il risparmio dei cittadini potrà tornare a finanziare ciò che crea valore reale per le comunità e la tutela del pianeta.

Federica Ielasi

Upcoming Negotiations on the Long-Term European Union Budget

The debate over financial sector rules and sustainable lending criteria moves directly toward upcoming institutional timelines, specifically centering on the negotiations for the European Union’s long-term budget spanning from 2028 through 2034. Stakeholders within the ethical banking sector intend to use this budgetary window to advocate for permanent public guarantees and standardized access criteria that reward verifiable environmental and social impact.