The European Commission has published a key Communication assessing the competitiveness of the EU banking sector, delivering on a major commitment under the Savings and Investments Union (SIU) strategy. While recognizing that EU banks have become significantly more resilient and profitable over the fifteen years since the global financial crisis, the Commission warns that deep-seated structural issues continue to hold back the sector’s potential to finance growth and innovation.
The report identifies three primary challenges. First, the single market for banking remains highly fragmented along national lines, which restricts cross-border consolidation and stops EU banks from achieving the scale necessary to compete with global peers. Second, the regulatory framework has grown overly complex, creating unnecessary administrative burdens and overlapping microprudential, macroprudential, and resolution rules. Finally, the EU’s implementation of international standards—particularly Basel III—often lacks sufficient proportionality, applying complex rules designed for large global institutions to smaller, regional banks.
To resolve these bottlenecks, the Commission plans to present a comprehensive legislative package by the first quarter of 2027 under the “One Europe, One Market” roadmap. Key measures will include streamlining capital buffers, enhancing supervisory transparency, and introducing targeted reporting simplifications. Crucially, the Commission intends to address cross-border barriers by making the allocation of capital and liquidity within integrated banking groups more efficient across the EU. Rather than letting over €230 billion in high-quality liquid assets remain trapped within national borders, integrated groups will be permitted to redirect these resources to where they are most productive, provided that robust local safeguards are in place.
Additionally, the Commission will replace its 2015 proposal for a European Deposit Insurance Scheme (EDIS) with a modernized initiative. This new proposal aims to simplify deposit insurance, utilize existing national and central safety nets, and ensure that cross-border bank failures are managed predictably at the European level.
Ultimately, the initiative does not aim to dilute safety or pursue deregulation, as financial stability remains a prerequisite for competitiveness. Instead, by driving a “cultural shift” toward risk-based supervision and eliminating redundant compliance burdens, the Commission aims to create a more integrated, dynamic banking sector capable of supporting the EU’s green, digital, and strategic transition goals.