EC adopts communication on competitiveness of EU banking sector

The European Commission (EC) has adopted a communication on the competitiveness of the EU banking sector, setting out measures to strengthen the Single Market for banking as part of its Savings and Investments Union strategy. Following a consultation in February and member state engagement, the EC has identified three key challenges that limit the banking sector's ability to support the EU economy effectively: (i) the sector remains too fragmented along national lines, preventing EU banks from scaling up and competing globally; (ii) the way Basel III standards are transposed into the EU framework does not always reflect the specific features of the EU banking landscape — the framework needs to work better for both large and small banks; and (iii) some parts of the EU regulatory framework, including the interaction between microprudential, macroprudential and resolution rules, as well as reporting requirements, are too complex and burdensome and should be simplified.

To address these challenges, the communication identifies measures that are built around three objectives:

• Removing barriers to cross-border banking activity and fostering market integration—allowing cross-border banking groups to use capital and liquidity more efficiently across the EU; strengthening common safeguards through proposing a simpler and more effective common deposit protection mechanism in the Banking Union, replacing the 2015 European Deposit Insurance Scheme proposal; and closer monitoring of EU anti-money laundering and consumer protection frameworks and their national implementation.
• Implementing international standards while considering EU specificities and proportionality—re-assessing how the EU implements certain international standards that may be limiting the lending capacity of EU banks; and possible revisions of certain prudential and corporate governance rules to better reflect EU banks' specificities in relation to banks' size, business models and activities.
• Simplifying the regulatory framework for banks—simplifying the capital stack and further harmonising banks' macroprudential buffers; standardising and streamlining resolution capital requirements and processes; and adjusting the criteria and thresholds for "small and non-complex institutions" and adapting their requirements.

The EC invites stakeholder feedback in the coming months and intends to publish a package of measures to amend the banking regulatory framework and deliver on this communication in Q1 2027. The EC has also published accompanying documents, including summaries of responses to its consultation and call for evidence, which can be found on its new webpage.

Return to main website.