European Central Bank supervisory chief Claudia Buch has called for deeper banking market integration across Europe, arguing that the European Union must promote competition and cross-border consolidation while preserving the regulatory safeguards that underpin financial stability.
In a statement responding to the European Commission’s consultation on bank competitiveness, Buch said Europe’s banking sector is currently resilient but remains structurally fragmented, limiting its long-term ability to compete, innovate, and support economic growth. She stressed that reforms adopted after the global financial crisis—including stronger supervision and capital requirements—have left European banks better capitalised, more liquid, and more trusted by markets, but warned that resilience alone is not enough.
According to Buch, Europe’s banking market remains heavily national in character, with around 80% of banks’ loan portfolios concentrated in domestic markets and only a small share of deposits held cross-border. Cross-border mergers remain rare, while concentration is increasing in some national markets. This fragmentation, she argued, hampers efficient risk sharing, constrains scale-driven investments in digital banking, and ultimately weakens the competitiveness of European lenders.
The ECB believes a more integrated banking market is essential if Europe is to finance major future investment needs, including in clean energy, digital infrastructure, defence, and advanced technologies. Buch emphasized that banks will continue to play a central role in Europe’s economy even as capital markets deepen.
To address the problem, the ECB is urging policymakers to reduce legal and regulatory barriers that make cross-border banking more costly, while allowing greater internal movement of capital and liquidity within banking groups under appropriate prudential safeguards. Buch also reiterated the ECB’s longstanding support for completing the banking union, including the creation of a European deposit insurance scheme, which she said would strengthen depositor confidence, weaken the link between banks and sovereigns, and encourage more cross-border activity.
At the same time, Buch warned against deregulation that could undermine the sector’s resilience. She argued that strong capital, liquidity, operational resilience, and cyber preparedness remain essential in an increasingly volatile geopolitical and economic environment. Preventive regulation, she said, is critical to reducing the long-term economic and fiscal costs of financial crises.
While defending robust prudential standards, Buch acknowledged that simplification is possible. She said the ECB supports reducing unnecessary complexity and duplicative reporting requirements so banks can focus more resources on risk management, innovation, and customer service.
Her remarks underscore the ECB’s position that Europe’s challenge is not to weaken banking regulation, but to complete the banking union and remove the structural barriers that continue to fragment the single market.
