Europe needs a more integrated, efficient and competitive banking sector. The reason is that banks are at the heart of Europe’s economy. They support households and finance businesses, including by providing most of the funding for small and medium sized enterprises.
More than fifteen years after the global financial crisis, Europe’s banks are generally resilient, profitable and well‑capitalised. However, the EU banking sector is often not efficient enough. The biggest handicap is a lack of scale. What Europe’s banks need is the right environment to grow, compete and consolidate.
Earlier this month, the Commission published a major report on the matter. We identified three major obstacles that hold back the competitiveness of our banks and their ability to support the wider economy
- the sector remains too fragmented along national lines. This prevents EU banks from scaling up, competing globally and finding efficiencies across borders
- the way international banking standards, known as Basel III, are transposed into the EU framework does not always reflect the specific features of the EU banking landscape
- some parts of the EU regulatory framework are too complex and burdensome
In our report, we set out measures to remedy all three
- greater market integration in the banking sector: Our goal is to allow cross‑border banks to manage capital and liquidity more efficiently across the EU. As greater capital circulation must go with stronger safeguards, we will also put forward a new proposal to replace the 2015 proposal for a European deposit insurance scheme
- better reflecting specificities of the EU banking sector: While staying fully committed to global standards, we will implement them in a way that considers the specific features of Europe’s financial system. We will also improve the proportionality in the framework for smaller banks
- simplifying the regulatory framework: 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
We will deliver our legislative proposals in the first quarter of 2027. In the meantime, stakeholders can provide their input and views through a call for feedback, which is open until 17 September.
If Europe wants a banking sector that can fully support its economy, its capital markets and its ambitions, then we must act now.
John Berrigan is Director‑General for Financial Stability, Financial Services and Capital Markets Union at the European Commission. This article was previously published on LinkedIn.
Related links
Communication on the competitiveness of the banking sector
Call for feedback on the report on the competitiveness of the banking sector
Factsheet: A stronger Europe through a more competitive banking sector
Savings and investments union
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