A Commission staff working document published on 17 July 2026 finds that EU banks remain central to the economy but face persistent fragmentation, complexity, and low valuations, requiring action on the single market, international standards, and regulatory simplification. The document, accompanying a Communication on banking sector competitiveness, notes that EU/EEA bank assets reached EUR 29 trillion as of June 2025 (80% of EU GDP), with loans and advances at EUR 20.3 trillion. However, profitability recovery since 2022 has not translated into higher valuations relative to global peers.
fragmentation of the single market, implementation of international standards (output floor, credit risk, market risk/FRTB), and undue complexity of the regulatory framework. It highlights that banks provide 46% of corporate debt financing in the EU, but this share has dropped 11% since the global financial crisis, varying from 12% in Ireland to 70% in Austria. SMEs received EUR 2.6 trillion in outstanding loans (40% of total corporate lending), with only 1% of firms having a loan request rejected in 2025, down from 3% in 2024.
The document's analysis points to trade-offs between regulatory harmonisation and national flexibility. Deeper capital markets and targeted simplification could boost competitiveness, but may also reduce consumer protection or financial stability if not carefully calibrated. The Commission's Communication is expected to feed into upcoming legislative proposals, with the European Parliament and Council likely to scrutinise the balance between integration and national sovereignty. The working document serves as a technical basis for policy discussions, emphasising the need for a more integrated single market while acknowledging the diversity of national banking structures.