Commission outlines measures to strengthen Europe's banking sector and support growth

The European Commission today adopted a Communication on the competitiveness of the EU banking sector, setting out measures to strengthen the Single Market for banking. 

President of the European Commission Ursula von der Leyen said: "Getting capital flowing is how we will get Europe growing. Our Savings and Investments Union needs a strong, competitive banking sector at its heart. And today's Communication takes a clear step in this direction, recalibrating our approach to risk, and enabling growth and innovation while maintaining financial stability.” 

The objective is to build a more integrated, efficient, and competitive banking sector that can strengthen Europe's economy by financing growth, innovation, and strategic priorities, underpinned by a better-balanced regulatory framework, creating the conditions for banks to take prudent risks while safeguarding the sector's resilience, delivering better services to households and businesses, all while preserving financial stability and fostering sustainable growth. 

This Communication is a key pillar of the Commission's Savings and Investments Union (SIU) strategy: having a banking sector with the strength and scale to finance growth and strategic priorities, such as innovation, the clean transition, and defence, while delivering high-quality financial services to households and businesses. 

Following a public consultation and exchanges with Member States, stakeholders, and supervisory authorities, the Commission has identified three main challenges that limit the banking sector's ability to support the EU economy effectively. 

First, the sector remains too fragmented along national lines. This prevents EU banks from scaling up and competing globally in key market segments and finding efficiencies across borders. Second, the way international banking standards, known as 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. Third, 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. Addressing these three challenges is essential to building a banking sector that is not only resilient and competitive, but also able to support the EU economy. 

Boosting competitiveness calls for a cultural shift in banking towards responsible, measured risk-taking. Simplifying the regulatory framework, integrating the Single Market and completing the Banking Union would help EU citizens and businesses access better products and services at more competitive prices.  

Key measures 

The Communication identifies key measures that are built around three objectives. 

First: removing barriers to cross-border banking activity and fostering market integration. Today's Communication sets out the path towards reducing prudential and non-prudential barriers to cross-border activity so that EU banks can reach the scale required to compete globally. This would include the following measures: 

• Allowing cross-border banking groups to use capital and liquidity more efficiently across the EU: this would allow groups to redirect excess funds to where they can be more productive without hampering their capacity to finance local economies, and without prejudice to financial stability across the Single Market and in each Member State. 

• Strengthening common safeguards: the Commission will seek to increase trust in the financial system and among supervisors by proposing a simpler and more effective common deposit protection mechanism in the Banking Union. This would replace the 2015 European Deposit Insurance Scheme proposal and build on existing central and national safety nets, which are now fully funded.  

• Closer monitoring of EU anti-money laundering and consumer protection frameworks and their national implementation: this would make it easier for banks to offer services across borders.

Second: implementing international standards while taking into account EU specificities and proportionality. The EU remains committed to applying international standards while better reflecting the specificities of the EU banking sector. To preserve the international level playing field and support EU banks to compete globally, the measures set out in the Communication include: 

• Re-assessing how the EU implements certain international standards, which may be in some cases limiting the lending capacity of EU banks. 

• Possible revisions of certain prudential and corporate governance rules to better reflect EU banks' specificities in relation to banks' size, business models, and activities.  

Finally: the regulatory framework for banks should be simplified as part of the Commission's wider objective of reducing administrative burden. Trust in the banking system depends on strong safeguards, but unnecessary complexity should be reduced and requirements made more predictable and transparent for banks and authorities alike. In particular, the Communication highlights:  

• Simplifying the capital stack and further harmonising banks' macroprudential buffers. 

• Standardising and streamlining resolution capital requirements and processes. 

• Adjusting the criteria and thresholds for “small and non-complex institutions” and adapting their requirements. 

Next steps 

The Commission has sought stakeholder feedback, and respondents are welcome to submit views or comments in the months to come. The Commission will propose in the first quarter of 2027 a package of measures to amend the banking regulatory framework and deliver on this Communication, in line with the objectives of the One Europe, One Market roadmap. In parallel, the Communication calls on Member States, supervisory authorities, and the banking industry to continue their own efforts to improve bank competitiveness. 

Background 

The SIU strategy aims to improve how the EU financial system channels savings into productive investment. It envisages an efficient and integrated banking sector based on a single rulebook and a completed Banking Union. The strategy is aligned with the EU's Competitiveness Compass, developed in response to the recommendations of the Letta and Draghi reports; the Single Market Strategy; and the One Europe, One Market roadmap.