The European Insurance and Occupational Pensions Authority (EIOPA) has warned against giving financial supervisors in the EU a ‘competitiveness mandate’ amid growing concerns about the European economy lagging behind its peers.

It noted that recent shifts in the global economy had highlighted the EU’s declining competitiveness, with high energy costs, market fragmentation, the lack of scale-up financing, and complex rules all cited as factors.

The authority acknowledged that simplifying the rules that firms follow was part of the answer, and highlighted that Europe’s renewed focus on competitiveness and regulatory streamlining had prompted greater calls for the EU’s financial supervisors to be given an explicit competitiveness mandate.

However, EIOPA warned that such a mandate would be “largely symbolic”, as it would do little to address the structural factors that impact the EU’s competitiveness and would likely leave supervisors with “few meaningful levers” to influence fiscal outcomes.

Additionally, the authority argued that a competitiveness mandate could create confusion about priorities, weaken supervisory credibility, and ultimately risk undermining trust in the financial system.

“The sources of Europe’s competitiveness struggles lie elsewhere and would scarcely be affected by the rewording of supervisory mandates,” EIOPA stated.

“Most factors that play a decisive role in shaping growth and competitiveness – like taxation, legal frameworks, market structure, labour conditions, skills, research or the price and availability of money – fall outside supervisory competences.

“Financial regulation’s contribution to this objective is therefore necessarily indirect and limited.”

The authority argued an explicit competitiveness mandate would blur the line between political and supervisory responsibilities, as choices about risk that provide the foundation for competitiveness lie with governments and legislators, and independent technical supervisors should not be forced to step into this domain.

Instead, EIOPA said the debate should focus on identifying areas where rules can be simplified without compromising supervisory objectives.

“Europe does not need supervisors with political mandates,” it continued. “It needs smarter regulation, deeper capital markets and a truly integrated single market.

“Those reforms would do far more to strengthen competitiveness than introducing a new role for supervisors.

“Europe's competitiveness challenge is real and demands forceful policy responses. Supervisors will contribute most effectively to the continent’s prosperity by doing what they were created to do: safeguarding a stable, trusted and resilient financial system for the benefit of consumers.”

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