EGOV Study on EU banking sector and competitiveness

The Economic Governance and EMU Scrutiny Unit has published a study on enhancing EU competitiveness in the banking sector, provided at the request of the European Parliament's Committee on Economic and Monetary Affairs. The study emphasises the importance of a resilient and efficient banking sector for EU competitiveness. Building on its analysis, the study has recommended that, to achieve this, the EU should first prioritise the defragmentation of the banking market, and second, simplify and streamline the prudential framework for banks without compromising resilience.

In line with these priorities, it has set out the following recommendations for the European Commission to address in its forthcoming 2026 report on the EU banking sector:

• Completion of the Banking Union to enhance the EU-wide allocation of credit by moving closer to the goal of a single banking system and to strengthen financial resilience by eliminating the threat of the bank-sovereign cycle.
• Integration of macroprudential decision-making in the banking union and simplifying the capital stack, including the set of loss-absorbing requirements, to reduce complexity and allow banks, particularly medium-sized ones, to focus more on core lending activities.
• Complementary reforms as additional options to support the two higher-priority recommendations above, including: (i) elimination of national gold plating; (ii) accounting harmonisation, by considering the imposition of mandatory international financial reporting standards (IFRS) for consolidated financial statements of all EU banks, and potentially a simplified IFRS for SMEs for individual accounts; (iii) enhancing consumer protection, starting with a comprehensive comparison of consumer protection regimes in all member states; and (iv) improving supervisory practices.

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