Meer documentenQuestions and answers on the Report on the competitiveness of the banking sector
What is this Communication about?
Today's Communication delivers on the commitment set out in the Savings and Investments Union (SIU) to assess the competitiveness of the EU banking sector.
While recognising the substantial improvements in the resilience and performance of the banking sector over the past 15 years since the global financial crisis, the Communication outlines the main challenges that hinder the sector's competitiveness and limit its contribution to the EU economy, while laying out measures to address them.
How does this Communication complement the Savings and Investments Union (SIU) strategy?
The SIU strategy aims to help the EU financial system channel savings more effectively into productive investments, while increasing financial opportunities for citizens and businesses. It covers both banking and capital markets.
Banks play an important role in the EU economy by supporting households and businesses. They provide 75% of corporate lending to EU companies.
Beyond their traditional role as deposit-takers and lenders, banks play a crucial role in capital markets. Many of them provide diverse retail investment products, act as a gateway for EU companies seeking access to capital markets, and, as market-makers, contribute to market liquidity.
Given this crucial role in the Union's economy, banks' efficiency and performance are paramount. The EU banking sector and capital markets are interdependent and should develop in parallel.
Stronger and larger EU banks can foster the development of EU capital markets, especially on a cross-border basis. In turn, more efficient and integrated capital markets can help EU banks become more competitive domestically and internationally.
What are the challenges for the competitiveness of EU banks?
The Communication identifies three main challenges holding back the full potential of the banking sector to support the EU economy.
- The single market for banking remains too fragmented along national lines. This limits scale and cross-border activity, reduces competition and hinders banks' ability to provide services to households and businesses across the EU. It also prevents EU banks from reaching the scale needed to compete with third-country banks in key market segments, such as investment banking, market-based finance and digital financial services, in particular in the EU market. In addition, fragmentation prevents geographic diversification and leaves banks more exposed to local shocks.
- The EU has in some cases added further details or obligations on top of international standards. We apply the Basel III standards that are designed for large internationally-active banks to all EU banks, including the smallest ones, even if with some proportionality elements. The Commission will consider adapting certain standards to better take account of EU specificities, such as size and business models.
- Undue complexity arising from the interaction between microprudential, macroprudential and resolution rules needs to be reduced. Aspects of the regulatory framework applying to EU banks, including reporting requirements, are unnecessarily complex and burdensome and should be simplified. Other aspects of the regulatory framework could be made more proportionate, as the EU needs to have both large banks able to compete internationally and smaller institutions that finance local businesses.
Addressing these three challenges is essential to have a banking sector that better supports the EU economy by financing growth and innovation.
Who will benefit from a more competitive and integrated banking sector, and how?
A more competitive and integrated banking sector would benefit the EU economy by helping to finance the EU's strategic priorities.
Encouraging more cross-border activity and stronger competition would directly benefit citizens and businesses, as it would lead to more diversified banking products and services for citizens and businesses with more competitive pricing.
Finally, enabling banks to consolidate operations across borders would help reduce costs related to compliance, risk management, and other infrastructure. Banks could then invest more in digital innovation and transformation and offer a wider, higher-quality range of services. Scaling up is also fundamental to adequately support the development of integrated capital markets.
How will the measures mentioned in the Communication affect financial stability and the resilience of the banking sector?
Resilience and competitiveness go hand in hand and reinforce each other. A banking sector that is not competitive cannot remain resilient over time, while a banking sector that is not resilient is not attractive for investors and cannot withstand shocks and stay competitive in the long term. The Communication seeks to advance both objectives by increasing the efficiency of the framework to improve the competitiveness of EU banks, while preserving the overall resilience of the system.
How will the Communication contribute to simplifying the bank regulatory framework?
The Communication paves the way to reducing the undue complexity of the regulatory framework, in line with the Commission's broader burden-reduction objectives.
This simplification is intended to deliver tangible benefits for both banks and authorities without undermining resilience. It does not mean weaker rules or deregulation. Financial stability and the resilience of the banking system remain preconditions for competitiveness, but unnecessary burdens should be removed. In practice, this may involve eliminating inconsistencies and overlaps across legal texts, reducing national discretion and gold-plating, and making the framework more proportionate to banks' size and business model.
The Communication sets out concrete measures to reduce undue complexity. The Commission will:
- make bank-specific capital requirements (Pillar 2 requirements) and supervisory guidance more transparent and targeted;
- simplify and further harmonise macroprudential and resolution buffers;
- encourage authorities to improve their coordination mechanisms so that they set prudential requirements in an ever-more coordinated way;
- introduce targeted changes enabling the European Banking Authority to deliver further proportionality, simplification and automation of bank reporting.
How will the Commission take into account EU specificities when implementing international standards?
The EU has been applying Basel III standards since 1 January 2025, with a number of transitional arrangements. While remaining committed to these international standards, the Commission intends to implement them in a way that better reflects the specific features and diversity of the EU banking system.
The diversity of the EU banking sector is a strength. The EU needs both large banks that can finance large-scale innovation and compete globally, which is important for the EU's strategic autonomy; and smaller, less complex banks that remain close to businesses and communities.
The EU is currently applying the full Basel III standards to all banks, not only large internationally-active ones, even if some proportionality is already embedded. In this context, the Communication signals further proportionality for smaller banks, including the possible adjustment of criteria and thresholds for “small and non-complex institutions” and adaptation of their requirements.
Like other jurisdictions, the Commission will assess the impact of the output floor, which is the backstop for excessively low modelled capital requirements. In addition, the Commission will examine the transitional arrangements for mortgage loans and loans for unrated corporates, which is important for households and SMEs.
How will the EU remove barriers to cross-border banking activity and foster market integration?
The Communication shows that simplification will provide benefits, but simplification alone will not make EU banks more competitive. A key challenge is the lack of scale and underwhelming level of cross-border banking activity: big EU banks may be large relative to national GDP, but they remain small compared to the EU economy as a whole and to major international peers. EU banks need the right environment to grow, compete, and consolidate.
To address this, the Communication targets barriers to market integration. At present, EU banking groups must meet prudential requirements at both parent and subsidiary level. This results in more than €230 billion in high-quality liquid assets being trapped within national borders. The Commission plans to allow cross-border banking groups that are well integrated to allocate capital and liquidity more efficiently across the Union, so that they can redirect excessive resources to where they would be most productive for the economy. Any reform in this respect would take on board the concerns around financial stability at local level of Member States hosting subsidiaries of cross-border banking groups.
At the same time, in times of crisis, the Communication stresses that strong and common safeguards are necessary to preserve financial stability and build trust among supervisors. For that reason, the Commission plans to replace the 2015 proposal for a European Deposit Insurance Scheme with a new proposal to simplify the deposit insurance framework, building on the existing safety nets at central and national levels, and address the remaining vulnerabilities of deposit guarantee schemes to liquidity shortfalls.
What does this Communication mean for the Banking Union?
Completing the Banking Union remains a priority for the Commission,as part of the Savings and Investments Union strategy.
This Communication places the Banking Union in a broader context and seeks to show that further Banking Union progress can make the framework more resilient, strengthen trust among supervisors and ultimately help reduce barriers to cross-border activity. While central supervision through the Single Supervision Mechanism (SSM) and the resolution framework through the Single Resolution Board are already in place, further steps are still needed to have a genuine Banking Union, including a way forward on common deposit insurance.
The overall objective is to strengthen bank competitiveness and support the EU economy.
What is the way forward for the European Deposit Insurance Scheme (EDIS)?
The Commission will replace the 2015 EDIS proposal with a new proposal that reflects the progress made in the regulatory and institutional environment over the past 10 years. The aim will be to strengthen the protection of bank deposits, regardless of whether a failing bank is dealt with through resolution or national insolvency proceedings.
The new proposal will better align the governance and financing of crisis management and deposit insurance within the Banking Union, building on the existing safety nets at both central (Single Resolution Fund) and national levels (Deposit Guarantee Schemes). It will also address the remaining vulnerabilities of deposit guarantee schemes. Most importantly, it will ensure that cross-border bank failures are handled at European level, so that individual Member States do not bear the cost alone. The Commission will also take into account the diversity of the banking sector and national specificities.
What is the Commission planning to do to facilitate cross-border banking services and address home-host issues?
The fragmentation of the banking market remains the major obstacle to banks' competitiveness. Although the Banking Union created a single supervisory mechanism and a single resolution mechanism under a common rulebook, concerns persist that banking groups operate on a European basis in normal times but are dealt with nationally in a crisis, with the failure of subsidiaries falling to national authorities.
To support a more efficient cross-border allocation of funds within banking groups and promote cross-border banking services, the Commission intends to develop safeguards that make depositor protection and crisis management more predictable and ensure they are handled more consistently at European level. The aim is to strengthen trust among authorities.
In addition to removing prudential barriers, the Communication also recognises that cross-border banking services can be facilitated through a closer look at non-prudential barriers, such as the application of anti-money laundering or consumer protection rules.
What is the Commission planning on capital buffers?
The Commission underlines the need to reform the macroprudential framework, while preserving financial stability. To that end, it will work to ensure a simpler macroprudential toolbox, as well as greater convergence and consistency in the application of macroprudential tools across the EU. For this purpose, the Commission will consider reducing the number of capital buffers and improving their design and calibration, with the aim of achieving more consistency and harmonisation in the level of capital required.
Will the simplification of prudential requirements (‘capital stack') lead to an increase or decrease of capital held by banks?
Our objective is to strengthen the efficiency of the framework and reduce undue financial and administrative burden for banks, while retaining the overall level of resilience of the system.
To achieve these objectives, certain requirements would need to be further harmonised and their design streamlined.
In doing so, some impact on capital levels may be expected, especially in those areas where there is high discretion and heterogeneity today.
Will the Commission propose a competitiveness mandate for the European Banking Authority?
Boosting competitiveness is not only about changing rules. The Communication acknowledges the need for a cultural shift and that all actors have a role to play:
- Supervisors should follow a more risk-based approach, avoiding a zero-risk tolerance mindset, as well as unnecessary reporting and overly prescriptive requirements.
- Banks should also accept that some legal ambiguity is unavoidable, rather than always seeking complete certainty through additional guidance, driven by excessive compliance considerations.
Do you plan to take any measures on sovereign exposures to increase the competitiveness of the banking sector? is there a link with advancing the Banking Union?
One of the Banking Union's objectives has been to isolate to a larger degree banks from sovereigns' crises. The situation has evolved since the EU sovereign debt crisis, as several structural reforms have been made contributing to this goal, including through the establishment of a Single Supervisor (SSM) and a Single Resolution Mechanism (SRM), as well as by increasing the overall resilience of the banking sector. Sovereign exposure is less of a prudential concern today than it was a decade ago, according to supervisory data. We will assess whether any further measures are needed to limit risk concentration and encourage the diversification of sovereign bond portfolios by banks.
How does the Communication take into account feedback from the consultation and the recommendations from the EU supervisors and regulators?
The targeted consultation launched by the Commission in February 2026 gathered views and evidence from 227 stakeholders, including banks, public authorities, business associations, and civil society from all EU Member States. This group included the main EU financial authorities.
The responses highlighted several key problems in the banking sector: complex rules, fragmented markets, uneven competition, and barriers to cross-border banking. Stakeholders generally supported deeper single market integration and a stronger Banking Union, although they had different views on how to achieve this.
The Commission encourages stakeholders to provide feedback on today's Communication. It will analyse the replies received, and dialogue with stakeholders will continue in view of the preparation of the legislative package due by the first quarter of 2027.
What are the next steps?
The Commission will adopt legislative proposals to amend the banking regulatory framework by the first quarter of 2027, in line with the ‘One Europe, One Market' roadmap. At the same time, the Communication includes several calls to Member States, supervisory authorities, and the banking industry to continue their efforts or change approaches to deliver on the objective of improving bank competitiveness to support the EU economy. A cultural shift in banking can already give tangible benefits now, irrespective of the outcome of political negotiations on the banking regulatory framework.
How will you collect stakeholder feedback on this Communication and how will it be taken into account?
The Commission remains committed to listening to stakeholders' feedback on the way forward presented in this Communication. Stakeholders can provide feedback on the Communication through the Have Your Say platform. The Commission will take both existing and any additional contributions into account when preparing the legislative proposals planned for the first quarter of 2027.
What is the Commission planning on consumer protection rules?
The Commission will monitor how Member States apply consumer protection rules, with the aim of facilitating cross-border banking activity and making it easier for consumers to access a wider range of banking services, while maintaining an adequate level of protection.
The Communication recognises that the diversity of the EU banking sector is one of Europe's core strengths and should be preserved. It underlines the importance of both large cross-border banking groups and smaller regional, cooperative and savings banks, which are essential for financing households, SMEs and local communities.
To ensure the framework works for all banks, regardless of size or business model, the Communication places strong emphasis on proportionality. In practice, this means calibrating rules more appropriately so that banks can support the real economy without facing unnecessary complexity. The Commission may therefore explore new thresholds and criteria for small and non-complex institutions and adapt requirements across the microprudential, macroprudential, and resolution frameworks to better reflect different bank profiles.
