The European Banking Federation has published a white paper on specialised lending arguing that EU prudential rules have become too conservative for a low risk, secured asset class and are driving financing for strategic European assets outside the EU banking system. It says specialised lending, including project finance, object finance, commodity finance and income producing real estate, is central to sectors such as energy, shipping, aviation and infrastructure, but current rules no longer reflect its economic risk. As evidence of the shift, the paper notes that Chinese banks provided 50% of Airbus funding in 2025 and that European banks' global ship finance portfolios fell to USD 152 billion in 2024 from USD 276 billion in 2014 while Asia-Pacific lenders expanded. The paper says loss given default floors and other prudential constraints are penalising most of the portfolio rather than covering genuine outliers. It cites Global Credit Data showing that 71% of realised losses in project finance are below the regulatory 25% LGD floor and that around three quarters of historical losses in aircraft finance are below the floor for a typical loan. The EBF calls for flexible modelling for low default portfolios under Article 174 of the Capital Requirements Regulation, lower LGD input floors for specialised lending or at least retention of the current 50% transitional arrangement, recalibration of regulatory LGD values under the Foundation Internal Ratings Based approach, and better collateral recognition under CRR Article 199 closer to the Basel standard. It also calls for a more risk sensitive Slotting Approach, lower risk weights for high quality project finance and object finance, permanent status for the high quality object finance transitional arrangement and the transitional arrangement for unrated corporates under CRR Article 465(3), and a freeze on the output floor to avoid a disproportionate effect on specialised lending.
European Banking Federation2026-06-16
European Banking Federation white paper calls for lower capital floors and more risk sensitive treatment of specialised lending
The European Banking Federation has issued a white paper arguing that EU capital rules are overly conservative for specialised lending and are pushing financing for strategic assets outside EU banks. It calls for lower or preserved LGD floors, improved collateral recognition, more risk sensitive slotting and standardised risk weights, permanent transitional relief for some exposures, and a freeze on the output floor. The paper cites a drop in European ship finance portfolios and growing reliance on non-EU banks, including Chinese banks funding 50% of Airbus in 2025.