Brussels Targets Banking Barriers

BRUSSELS – The European Commission has launched a potentially far-reaching attempt to remove the national barriers that continue to divide Europe’s banking market. The initiative links banking integration directly to the EU’s ability to finance innovation, industrial transformation, the green and digital transitions, security and defence.

In its Communication on banking-sector competitiveness , the Commission argues that European banks remain constrained by different national rules, supervisory practices, tax systems, insolvency frameworks, consumer-protection requirements and anti-money-laundering arrangements. These differences increase costs and make genuinely pan-European banking services difficult to develop.

Capital and liquidity also remain partly confined within the national subsidiaries of cross-border banking groups. National authorities want to ensure that local banks retain sufficient resources during a crisis, while banking groups argue that these restrictions prevent them from allocating funds where they could be used most productively.

Regulatory complexity creates another obstacle. Prudential, resolution, supervisory and reporting requirements have developed through overlapping layers, while international standards do not always reflect an EU economy that remains heavily dependent on bank lending and on small and medium-sized companies without external credit ratings.

Brussels wants to create a genuine Single Market for banking without compromising financial stability. Its agenda includes the more efficient use of capital and liquidity within cross-border groups, proportionate requirements for smaller banks, simpler capital buffers and resolution rules, and more integrated and automated regulatory reporting.