On 17 July 2026, the European Commission published a communication outlining a package of legislative and non-legislative measures aimed at enhancing the competitiveness of the EU banking sector and deepening the single market in banking. The document, issued by the Directorate-General for Financial Stability, Financial Services and Capital Markets Union (DG FISMA), identifies three main challenges: fragmentation along national borders, insufficient tailoring of international standards to EU specificities, and undue regulatory complexity. The package targets all EU banks, supervisors, and national authorities, with the goal of fostering cross-border consolidation while preserving financial stability.
The communication notes that the EU banking sector is resilient and profitable but remains fragmented, with only about 16% of euro area corporate lending occurring across borders. Cross-border banking groups must currently comply with capital and liquidity requirements at both consolidated and subsidiary levels, acting as a de facto barrier to mergers. The Commission estimates that removing constraints on liquidity in subsidiaries could release approximately EUR 230 billion of high-quality liquid assets. National gold-plating, divergent transposition of EU rules, and unjustified national interventions in bank mergers are also cited as hindrances to cross-border consolidation.
To address these issues, the Commission proposes measures to foster market integration with safeguards for financial stability, simplify capital requirements regulation, and better reflect EU specificities and proportionality in implementing international standards. The package aims to reduce the multi-layered rules, duplicative reporting, and overlapping microprudential, macroprudential, and resolution requirements that have made the regulatory framework unduly complex. Coordination challenges among multiple authorities—including the European Central Bank, the Single Resolution Board, the European Systemic Risk Board, the European Banking Authority, and national bodies—are also targeted for improvement.
Stakeholder impact The proposed measures have significant implications for key stakeholders. EU banks, particularly cross-border groups, stand to benefit from reduced compliance costs and greater operational flexibility, potentially enabling them to achieve economies of scale and compete more effectively with global peers. However, smaller, domestically focused banks may face increased competitive pressure from larger, more efficient cross-border institutions. National supervisors and authorities will see changes in their roles, with potential loss of autonomy in areas such as merger approvals and gold-plating, but may gain from streamlined coordination and reduced reporting burdens. EU consumers and corporate borrowers could benefit from increased cross-border lending and more competitive pricing, though concerns about financial stability and consumer protection may arise if consolidation leads to larger, more interconnected institutions. The European Parliament and the Council will now examine the proposals, with debates expected on the balance between market integration and national sovereignty over banking supervision.