COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN CENTRAL BANK, THE EUROPEAN ECONOMIC AND SOCIAL COMMITEE AND THE COMMITTEE OF THE REGIONS Competitiveness of the Banking Sector and the Single Market in Banking
Date: 2026-07-17
Institutions: Directorate-General for Financial Stability, Financial Services and Capital Markets Union, European Commission
Subjects: EU banking union, banking policy, banking supervision, banking system, capital market, competitiveness, financial stability, financial supervision, investment, single market

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 17.7.2026  COM(2026) 615 final  COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN CENTRAL BANK, THE EUROPEAN ECONOMIC AND SOCIAL COMMITEE AND THE COMMITTEE OF THE REGIONS Competitiveness of the Banking Sector and the Single Market in Banking {SWD(2026) 615 final}  
 
 
COMMUNICATION FROM THE COMMISSION TO THE PARLIAMENT, THE 
COUNCIL, THE EUROPEAN CENTRAL BANK, THE EUROPEAN ECONOMIC 
AND SOCIAL COMMITEE AND THE COMMITTEE OF THE REGIONS 

Competitiveness of the Banking Sector and the Single Market in Banking 

1 

 
 
 
 
 
 
 
1. The role of the banking sector in the EU economy 

Banks play a key role in the EU economy and a competitive banking sector is essential to 
finance growth, innovation and strategic priorities. Banks’ competitiveness also relies and 
depends on a flourishing and robust economy. Banks are the main source of financing for EU 
households, large corporates, and small and medium-sized enterprises. Beyond their traditional 
role in lending, banks facilitate access to capital markets, helping firms to obtain equity and 
debt financing and enabling savers to invest. In a rapidly evolving geopolitical landscape, these 
various roles of the banking sector are even more important in preserving the EU’s strategic 
autonomy. Their role is critical to meet the growing financing needs faced by EU companies, 
particularly in strategic sectors. 

The Savings and Investments Union (SIU) strategy1 will improve the way the EU financial 
system  facilitates  the  allocation  of  savings  to  productive  investments.  The  strategy 
envisages  an  efficient  and  integrated  banking  sector,  based  on  a  single  rulebook  and  a 
completed Banking Union. The strategy, and the outline of proposals in this report, are aligned 
with  the  EU’s  Competitiveness  Compass2,  the  recommendations  of  the  Letta3  and  Draghi4 
reports,  the  Single  Market  Strategy5,  the  ‘One  Europe,  One  Market’  roadmap6  and  the 
Regulatory Deep Cleaning Action Plan7. In supporting the wider EU economy, a competitive 
banking sector must have the possibility to operate as seamlessly as possible across borders, 
offer  a  wider  choice  of  products  to  savers  and  investors  and  reach  appropriate  scale  in 
accordance  with  prudential  requirements  and  competition  rules.  At  the  same  time,  a 
competitive banking sector must be sufficiently flexible, have diversified business models, be 
able to foster innovation, and accommodate new entrants.   

The EU banking sector and capital markets are inter-dependent and should develop in 
parallel. Banks can help foster the development of EU capital markets, especially on a cross-
border basis, while benefitting from significant revenue streams linked to related investment 
and corporate services. Banks can accompany investors, for example, through the development 
of tailored products or underwriting activities. In turn, a more efficient and integrated capital 
market can help banks to become more competitive domestically and internationally. In the 
EU,  this  complementarity  between  the  banking  and  capital  markets  would  not  only  help  in 
financing the economy, including its strategic priorities, but would reduce reliance on foreign 
international banks for critical financial services.  

A poorly performing or fragile banking sector cannot play its economic role effectively 
and support the growing investment needs faced by EU companies. Accordingly, the EU 
banking  sector  must  be  sufficiently  robust  and  resilient  to  potential  shocks,  with  solid 

1 
2 
3 
4 
5 
6 

7  

European Commission (2025), Savings and Investments Union Strategy. 
European Commission (2025), EU Competitiveness Compass. 
Enrico Letta (2024), Much more than a market. 
Mario Draghi (2025), The future of European competitiveness. 
European Commission (2025), A strategy for making the Single Market simple, seamless and strong. 
European  Commission  (2026),  One  Europe,  One  Market  Roadmap  of  the  European  Parliament,  the 
Council of the European Union and the European Commission.  
European  Commission  (April  2026),  Regulatory  Deep  Cleaning  Action  Plan  accompanying  the 
communication on a Simpler, Clearer and Better Enforced EU Rulebook. 

2 

 
 
 
fundamentals (e.g. profitability, market valuations, return on equity, lean cost structures, robust 
governance), and appropriately calibrated levels of capital and liquidity. Indeed, such resilience 
can be regarded as a crucial aspect of competitiveness in the banking sector.  

This  Communication  and  the  accompanying Staff  Working  Document  deliver  on  the 
Commission’s  commitment  to  assess  the  current  state  of  competitiveness  in  the  EU 
banking sector. The following sections highlight the substantial progress made in improving 
the  resilience  and  overall  performance  of  the  sector  in  the  past  15  years,  outline  the  main 
problems that still need to be addressed and propose a positive, future-oriented way forward. 
It  is  based  on  extensive  consultations  with  all  stakeholders  to  ensure  that  the  analysis, 
assessment  and  conclusions  are  rooted  in  evidence  as  outlined  in  the  accompanying  Staff 
Working Document.  

In considering the competitiveness of the EU banking sector, trade-offs between various 
objectives must be acknowledged up front, including the following:  

➢  Promoting  innovation  and  sustainable  growth  must  be  achieved  while  preserving 
resilience.  Promoting  innovation  and  growth  in  the  EU  economy  will  require 
responsible  culture  change,  and  some  rebalancing  in  the  regulatory  framework  for 
banks, implying movement from a current, often highly risk-averse approach to a one 
that is open to responsible and measured risks. The Commission has a key role to play 
in  that  regard,  by  reflecting  on  the  appropriate  level  of  risk  the  system  overall  can 
support.  However,  the  resilience  of  the  banking  sector  must  be  preserved,  as  it  is  a 
precondition to sustainable growth.  

➢  Harmonisation of rules at the EU level implies reduced national discretion. Building 
an integrated EU banking sector will require a truly single rulebook but this cannot be 
implementation,  reporting  duplication  or 
achieved 
overreaching of national powers with regards to mergers continue. 

if  gold-plating,  divergent 

➢  Integration of the EU banking sector must be accompanied by appropriate safeguards 
to address legitimate concerns. Integration of the banking sector requires a change in 
the current relationship between home and host Member States and will be acceptable 
only if financial stability in all  Member States is equally protected.  

➢  Measures taken to boost competitiveness can be expected to impact the level of capital 
requirements of banks. Improving market integration, removing overlaps, simplifying 
the  regulatory  framework,  harmonising  methodologies  for  certain  requirements  or 
introducing more proportionality, will have an impact on the requirements applied to 
certain banks in certain policy areas, and will require careful calibration in light of their 
overall impacts.  

Managing  these various  trade-offs will require a  combination of technical  expertise  and 
political judgement in carefully adjusting the balance between  risk-taking and resilience 
within the banking sector. It will be done through the measures outlined in this report and 

3 

 
 
 
 
 
on  a  continuous  basis  through  more  forceful  monitoring  by  the  Commission  of  the 
competitiveness of the banking sector.  

2. Progress and remaining challenges in the EU single banking 

market  

In response to the global financial crisis (GFC), the EU has developed a single rulebook 
for banks and has reformed its supervisory, resolution and macroprudential frameworks. 
Over the past 15 years, these reforms have helped to improve banks’ resilience and facilitated 
effective  crisis  management  when  needed.  In  the  Banking  Union,  the  Single  Supervisory 
Mechanism (SSM) is responsible for authorising all banks and directly supervises 111 banks 
representing  over  85%  of  total  banking  assets.  For  those  banks,  the  Single  Resolution 
Mechanism (SRM) is responsible for crisis preparedness and management and is supported by 
a  Single  Resolution  Fund  (SRF)  of  more  than  EUR  81  billion.  National  deposit  guarantee 
schemes are well-funded and have been reinforced to allow rapid redemptions, thus increasing 
depositor  confidence. The  European  Banking Authority  (EBA)  has  played  a  central  role  in 
developing  the  single  rulebook  and  strengthening  supervisory  convergence  across  the  EU, 
while the European Systemic Risk Board (ESRB) has played the role of early-warning system 
and assisted in the implementation of national macroprudential measures. 

Regulatory  and 
institutional  reforms  have  been  accompanied  by  a  profound 
transformation in the EU banking sector. In contrast to the period leading up to the GFC, 
EU  banks  are  resilient  with  strong  capital  and  liquidity  positions.  This  resilience  has  been 
consistently  confirmed  by  EU-wide  stress  testing  exercises  carried  out  by  the  EBA  and  the 
European Central Bank (ECB), including the most recent exercise conducted in 20258. More 
importantly,  the  EU  banking  sector’s  resilience  has  proven  its  effectiveness  in  real-world 
conditions  during  the  COVID-19  pandemic,  the  energy  shock  following  Russia’s  full-scale 
invasion of Ukraine, and the banking turmoil in the United States and Switzerland in spring 
2023. Banks acted as shock absorbers rather than amplifiers of economic stress. Since 2023, 
EU banks have also returned to sustained profitability, reaching pre-crisis returns on equity, 
showing that resilience and profitability can go hand-in-hand. 

The EU banking sector is resilient and profitable, but it remains highly fragmented along 
national borders and faces a number of challenges related to the regulatory framework 
and its implementation. These challenges need to be addressed to allow deeper involvement 
of banks in addressing the significant investment needs which the Draghi report identified at 1 
200  billion  EUR  annually,  to  maintain  competitiveness,  progress  on  the  twin  transitions, 
strengthen  security  and  resilience  and  remain  technologically  sovereign,  translating  into 
investment needs especially in strategic sectors such as deep tech, clean-tech, defence, artificial 
intelligence, and biotech. 

8  

For more details, see here the report of the 2025 EU wide stress test exercise run by the EBA (link) and 
the ECB (link). 

4 

 
 
 
 
The Commission has identified three main challenges limiting the potential of the banking 
sector  from  effectively  supporting  the  EU  economy.  First,  the  sector  is  too  fragmented, 
preventing  upscaling,  efficiency  gains,  productive  use  of  resources,  and  geographic 
diversification across national borders. Second, the transposition of international standards into 
the EU regulatory framework could better consider EU specificities and be more proportionate. 
Third, certain aspects of the EU regulatory framework are unduly complex and burdensome 
and should be simplified. Addressing all three of these challenges is essential to build a banking 
sector that is not just resilient but better supports the EU economy by financing sustainable 
growth, innovation, security and long-term prosperity.  

2.1  Fragmentation along national borders 

Cross-border  integration  of  the  EU  banking  sector  has  improved  over  past  years  but 
remains at unsatisfactory levels. Integration is mostly limited to the interbank market, with 
other  cross-border  activities  remaining  very  limited.  For  example,  cross-border  corporate 
lending  within  the  euro  area  represents  only  about  16%  of  total  corporate  lending9. This  is 
mainly due to difficulties in reaching clients in other Member States without a physical bank 
presence, or in expanding and establishing a bank presence in new markets, either organically 
or through cross-border consolidation. Since the GFC, consolidation of the EU banking sector 
has occurred almost exclusively domestically, as cross-border mergers and acquisitions across 
the EU have significantly declined, albeit with an increase in 2025. This has resulted in many 
banking groups in the EU being large relative to the size of their home economy, but not relative 
to the size of the EU or the Banking Union economies, or international competitors.  

Fragmentation in the banking sector  reflects a very pronounced  national dimension in 
the EU regulatory framework.  

➢  Unlike in other jurisdictions, the EU regulatory framework requires cross-border 
banking  groups  to  comply  with  capital  and  liquidity  requirements  at  both 
consolidated level and at the level of subsidiaries. This feature prevents these groups 
from  managing  more  of  these  resources  centrally  at  group  level,  thereby  limiting 
efficiency. Furthermore, it limits the efficiency of cross-border banking groups, acting 
as  a  de-facto  barrier  to  cross-border  mergers.  It  has  been  estimated  that  removing 
constraints  on  liquidity  held  in  the  cross-border  subsidiaries  of  EU  banking  groups 
would  release  about  EUR  230  billion  of  high-quality  liquid  assets10.  This  strong 
national  dimension  in  prudential  regulation  reflects  concerns  about  the  potential 
impacts  of  a  bank  failure  on  the  economies  of  Member  States  hosting  cross-border 
subsidiaries. Such concerns persist despite the implementation of the single rulebook, 
the significant levels of resilience achieved by banks, and progress in developing the 
Banking Union (which,  however, remains incomplete, especially in the absence of  a 

9 

10 

European Central Bank (2026), ECB response to the Commission consultation on the competitiveness of 
the EU banking sector 
European Central Bank (2026), ECB response to the Commission consultation on the competitiveness 
of the EU banking sector 

5 

 
 
 
 
Banking  Union-wide  mechanism  for  deposit  insurance).  Other  prudential  factors 
contributing  to  persistent  fragmentation  are  the  divergent  treatment  of  domestic  and 
cross-border  intragroup  exposures,  the  heterogeneity  and  lack  of  predictability  in 
setting  prudential  requirements  and  the  insufficient  coordination  among  supervisors, 
resolution and macroprudential authorities. 

➢  National gold-plating and differences in the transposition of EU rules is a further 
source  of  fragmentation.  These  elements  undermine  the  effectiveness  of  the  single 
rulebook,  making  it  cumbersome  and  costly  for  banking  groups  to  operate  across 
borders. Meanwhile, increased reliance on soft-law instruments within the regulatory 
framework  –  often  interpreted  as  binding  constraints  by  EU  and  national  competent 
authorities,  banks’  compliance  officers  and  external  auditors  –  can  compound  this 
effect.  

➢  National interventions in bank mergers prevent banks from acquiring scale at EU 
level. Unjustified interventions at the national level too often hinder the ability of EU 
banks to consolidate. As a result, those banks are prevented from scaling up at the EU 
level11, including via cross-border mergers. This impacts their valuations and ability to 
generate  efficiency  gains,  limits  their  capacity  to  offer  critical  financial  services  to 
households and businesses and constrains them from effectively competing in global 
financial markets for corporate and investment banking activities.  

➢  National rules or differences in the transposition of EU rules in areas other than 
the  prudential  sphere  limit  cross-border  banking  activities  These  non-prudential 
barriers include anti-money laundering controls, civil law, data protection, taxation12, 
insolvency  law  and  foreclosure  rules  and  certain  consumer  protection  rules  that, 
although somehow harmonised at EU level, are not applied uniformly across Member 
States. The  implementation  of  different  national  rules  can  disincentivise  banks  from 
pursuing the cross-border provision of services, particularly in retail banking. In today’s 
increasingly digital environment, a crucial limitation relates to IT platforms developed 
by banks to cater for the needs of a national market which cannot be easily replicated 
across  the  EU.  This  constrains  the  business  model  of  cross-border  banking,  limits 
competition among banks, reduces choice for clients, and increases prices.  

11 

12  

Scale  is  an  important  factor  determining  a  bank’s  contribution  to  the  economy  in  a  number  of  areas 
pertaining to investment banking activities, e.g. underwriting sovereign or commercial debt issuances, 
equity issuance, custodian services, primary dealing in EUR forex and derivatives markets, M&A advise 
and deal structuring, financing of large critical projects and others. 
The  European Commission  recently  published  a study undertaken  by  an  external  consultant  on  the 
current  tax framework  of  the  financial  sector. This  study  looks  at  both VAT  –  from  which  most  core 
financial services are exempt – and sectoral taxes applied at the national level in the EU.  

6 

 
 
 
 
 
 
 
 
 
Implementing  international  standards  taking  into  account  EU 

2.2  
specificities 

The  EU  is  committed  to  the  international  standards  set  by  the  Basel  Committee  for 
Banking  Supervision  and  recommendations  of  the  Financial  Stability  Board.  The 
implementation of international standards is essential to protect financial stability and preserve 
the level playing field. In the EU, contrary to other jurisdictions, international standards are 
applied to all banks to preserve the integrity of the Single Market. There are more than 4500 
banks  and  around  650  banking  groups  in  the  EU,  creating  a  diverse  banking  ecosystem 
financing the EU economy. Banks range from complex global systemically important banks 
operating worldwide, to smaller banks with a more traditional or less complex business model 
that support local SME financing, including in less developed regions. Because of their role in 
financing the  EU economy,  the regulatory framework should  enable  banks  to  finance many 
different  types  of  companies,  from  long-established  businesses  to  fast  growing  digital 
companies, including startups and scale-ups. Furthermore, the European market relies on bank 
lending  to  finance  essential  long-term,  strategic  investments.  Despite  efforts  to  reflect  this 
diversity  in  the  regulatory  framework,  many  rules  continue  to  apply  irrespective  of  size  or 
business models, resulting in unnecessary complexity and administrative burden for banks. 

Large EU banks compete globally and are required to operate in an environment where 
implementation  of  international  standards  differs  across  jurisdictions.  Deviations  and 
delays  in  implementing  agreed  international  standards  in  some  major  jurisdictions  have 
increased concerns regarding EU banks’ competitiveness in global markets. To address severe 
competitive imbalances prompted by third-country jurisdictions failing to meet international 
standards,  the  Commission  will  continue  to  closely  monitor  the  international  situation  and 
make use of the available regulatory tools, while safeguarding financial stability. 

In addition,  the EU regulatory framework,  and its  implementation  involving many different 
authorities,  add  layers  of  requirements  that  go  beyond  the  international  standards.  In  this 
respect,  the  EU  differs  substantially  from  other  major  jurisdictions.  Combined,  the 
characteristics of the European banking system and the specificities of the EU regulatory and 
supervisory framework, require a careful consideration of the implementation of international 
standards.  

2.3  Undue complexity in the regulatory framework 

While post-GFC reforms have significantly improved resilience in the EU banking sector, 
the regulatory framework has become unduly complex.  

➢  Complexity arises in part from the multi-layered granular regulatory framework. 
The  framework  is  based  on  two  distinct  levels  of  legislation13  and  additional 
supervisory guidance14 co-existing, in many cases, with additional national rules. While 

13  

14  

Level 1 “framework legislation” (regulations or directives) and Level 2 “technical measures” (delegated 
and implementing acts and regulatory and implementing technical standards).  
Level  3  “supervisory  convergence”  guidance  (European  Supervisory  Authorities’  Guidelines), 
interpretative Q&As, opinions, recommendations and supervisory practices and horizontal expectations.  

7 

 
 
 
these  multiple  layers  allow  for  faster  and  tailored  amendments  whenever  necessary 
without  recourse  to  a  lengthy  legislative  amendment  process,  they  are  at  times 
excessively granular thus becoming burdensome to implement, in particular for smaller 
banks.  The  increasing  granularity  in  the  EU  framework  also  reflects  an  effort  to 
standardise how EU rules are applied at national level. Also, banks themselves often 
create unnecessary complexity and granularity by over-interpreting regulations or by 
seeking regulatory and supervisory guidance to minimise compliance risks.  

➢  Reporting and disclosure requirements can also be a source of complexity. While 
data  reported  by  banks  is  needed  to  supervise  banks  and  promote  market  integrity, 
reporting and disclosure requirements have become in many cases burdensome, costly 
and duplicative. 

➢  Complexity is further compounded by parallel or sometimes overlapping rules on 
microprudential, macroprudential, and resolution aspects. This is because parts of 
the  banking  framework  have  been  reformed  in  several  stages  and  often  in  isolation. 
Furthermore, co-legislators have, over time, largely transposed or preserved national 
specificities in EU legislation. The overlaps with the various requirements that banks 
must meet at the same time can give rise to duplications and limit buffer usability (the 
capital stack issue)15. Moreover, the interaction of the rules across the three separate but 
inter-related prudential fields is often sub-optimal.   

➢  Implementation of the regulatory framework lacks a holistic overview due to the 
many  actors  involved.  National  supervisors,  macroprudential  authorities,  national 
resolution authorities, the ECB, the SRB, the ESRB and the EBA are all involved in 
implementing  the  regulatory  framework,  resulting  in  significant  coordination 
challenges. While the Banking Union has improved the situation by providing for single 
supervision  and  resolution  for  the  larger  banks  within  its  scope,  there  is  insufficient 
consideration of how requirements set by different authorities interact, their combined 
impacts and the extent to which resulting inefficiencies are passed on to EU households 
and businesses.  

3. A way forward for the EU banking sector 

The  range  and  nature  of  challenges  facing  the  EU  banking  sector  require  coherent, 
future-oriented,  comprehensive  and  ambitious  policy  measures,  based  on  an  impact 
assessment,  as  per  the  Better  Regulation  principles. Acting  to  address  only  some  of  the 
challenges  will  not  be  sufficient  to  create  the  conditions  for  a  sustainable  and  structural 
improvement in competitiveness, or to ensure that those improvements are durable over time. 
This package would comprise legislative and non-legislative measures, including measures to 
simplify and streamline the regulation of capital requirements. Proposed measures will foster 

15  

EBA (June 2026), EBA Report on Simplifying the Stacking Order of the EU Prudential and Resolution 
Framework 

8 

 
 
 
 
 
 
 
market integration with appropriate safeguards for financial stability across all Member States, 
to  ensure  that  the  implementation  of  international  standards  takes  greater  account  of  EU 
specificities and reflects a proportionate approach, with a strong emphasis on simplifying the 
EU  regulatory  framework  throughout  any  forthcoming  proposals.  This  will  include  the 
formalisation of the de-priorisation of EBA mandates for technical standards, as discussed with 
the co-legislators.  

3.1   Fostering integration with appropriate safeguards 

Inefficiencies  linked  to  fragmentation  along  national  borders  are  clearly  undermining 
competitiveness in the EU banking sector and must be addressed by actions in a range of areas. 

➢  Addressing prudential barriers to integration 

EU banking groups must comply with prudential requirements at every level, from the 
main parent company down  to each individual  subsidiary. EU law  allows exceptions to 
these  rules,  but  mainly  if  a  subsidiary  is  located  in  the  same  Member  State  as  its  parent 
company.  The  prudential  requirements  for  cross-border  groups  provide  reassurance  to  host 
Member States in relation to local financial stability concerns, but they can hinder the efficient 
allocation of resources within these groups and ultimately affect their overall performance and 
resilience. Supervisors of cross-border groups should have the powers to ensure that liquidity 
and capital are distributed more efficiently among the parent and its subsidiaries, including in 
stress situations. This would allow for a more efficient allocation of resources within cross-
border  banking  groups,  implying  more  opportunities  for  economies  of  scale  and  risk 
diversification (notably as regards sovereign exposures16) and lower costs for households and 
businesses. Such benefits would make the banking sector more competitive overall and would 
support  the  financing  of  key  EU  priorities.  The  way  cross-border  groups  structure  their 
operations should be based on commercial decisions, in line with prudential and competition 
policy  requirements,  and  should  not  be  subject  to  unjustified  interference  by  national 
authorities.  

In this context, the Commission will: 

▪  Propose  measures  to  allow  cross-border  groups  to  enhance  efficiency  in  the 
allocation of capital and liquidity. Group-wide supervisors should have the power to 
ensure that requirements are met at the level of the parent entity and to require that 
the parent allocates sufficient resources to its subsidiaries in a timely and enforceable 
manner, both in going concern and in crises situations. The exercise of those powers 
should consider the diversity of cross-border banking groups, including the nature of 
the subsidiaries within the group, their resilience, as well as the level of integration 

16 

Claudia Buch (2026), The bank-sovereign nexus: securing progress by completing the banking union, 
which also notes that the home-bias in bank’s holdings of sovereign exposures has decreased in recent 
years, in particular for large banks supervised by the SSM. 

9 

 
 
    
 
and commitments made within groups. Also, the exercise of those powers should be 
underpinned by appropriate safeguards regarding creditor and depositor protection. 

▪  Propose measures to apply a similar regulatory treatment of intragroup exposures17 

at both domestic and EU levels. 

▪  Propose further measures to address the risk of excessive concentration of sovereign 
exposures and further encourage the diversification of sovereign bond portfolios by 
banks.  

▪  Use  its  enforcement  toolkit  where  it  identifies  breaches  of  Union  law  by  Member 
States,  notably  regarding  interventions  in  mergers  and  acquisitions  which  risk 
undermining the free movement of services and capital, as well as the freedom  of 
establishment set out in the Treaty on the Functioning of the European Union. The 
new  draft  merger  guidelines18  also  give  Member  States  clearer  guidance  on  the 
circumstances  under  which  they  may  intervene  in  transactions  subject  to  merger 
control at EU level. 

➢  Providing appropriate safeguards 

Measures  addressing  prudential  barriers  to  integration  must  be  accompanied  by 
appropriate safeguards  ensuring  financial stability across  the EU. Concerns persist that 
subsidiaries  of  cross-border  banking  groups  could  face  capital  and  liquidity  shortages, 
especially in times of crisis, leaving national authorities to manage failures without sufficient 
support from the parent.  

Many  cross-border  groups  operate  under  a  single-point-of-entry  resolution  strategy,  where 
crisis management measures are applied at the parent level, while subsidiaries are supported 
through the upstreaming of losses to the parent and downstreaming of capital. If group-wide 
support  falters,  subsidiaries  –  especially  if  important  for  local  economies  –  could  be  left 
vulnerable,  potentially  triggering  intervention  from  national  Deposit  Guarantee  Scheme 
(DGS).19 Addressing  these  risks  requires  building  trust  among  authorities  by  ensuring  that 
capital,  liquidity,  recovery  and  resolution  plans  are  strong  enough  to  maintain  adequate 
provision of services and prevent disorderly outcomes. Mechanisms would also be required to 
ensure the financial soundness of cross-border group as a whole as it emerges from resolution 
and seeks to regain access to financial markets. The SSM and the SRM, supported by the single 
rulebook, are well placed to offer these safeguards. Three quarters of the covered deposits in 
the Banking Union are now under the direct oversight of the SSM and SRB and are held in 

17  
18  

19  

Any asset, liability, or financial relationship between entities within the same group. 
The guidance highlights that EU law only permits such national interventions for specific reasons other 
than protecting competition. Interventions should be limited to those strictly necessary to protect genuine 
legitimate  interests  and  must  adhere  to  the  principles  of  proportionality  and  non-discrimination.  
Commission’s new draft merger guidelines, p. 90.  
In addition, while DGSs are fully built and some of them exceed the minimum target level, they may 
remain  vulnerable  to  local  shocks  resulting  from  the  failure  of  one  or  several  small  banks,  creating 
potential liquidity shortfalls that may force them to rely on public support.  

10 

 
 
 
 
 
banks planned for resolution at EU level, as opposed to liquidation under national insolvency 
proceedings. These banks have appropriate loss-absorbing capacity and potential access to the 
SRF, which already ensures a high degree of loss mutualisation within the banking sector.  At 
the same time, the Commission will give due consideration to non-Banking Union Member 
States, which operate under different institutional arrangements. 

In this context, the Commission will: 

▪  Replace  the  2015  EDIS  proposal  with  a  new  proposal  to  review  and  simplify  the 
structure of the deposit insurance framework to better align the responsibilities for 
and  financing  of  crisis  management  and  deposit  insurance  measures,  within  the 
existing safety nets of the Banking Union, both at central and national levels. The 
proposal  will  also  address  the  remaining  vulnerabilities  of  DGSs  to  liquidity 
shortfalls.  The  objective  will  be  to  ensure  that  the  failure  of  a  cross-border  group 
would not create distortions in individual Member States or liabilities to DGSs and 
national  budgets,  as  well  as  to  ensuring  equal  protection  of  covered  deposits 
throughout the Banking Union. Overall, it will reduce the complexity deriving from 
the current delineation between deposit guarantee schemes and resolution funds. 

▪  Propose measures to improve the predictability of group resolution strategies and to 
support a more integrated allocation of funds within cross-border groups, including 
in times of stress. 

▪  Support  ongoing  efforts  between  relevant  institutions  and  Member  States  to 
strengthen credible and predictable backstop funding mechanisms for the provision 
of  liquidity  in  resolution  with  adequate  safeguards,  in  line  with  the  European 
dimension  of  resolution  and  supervision  in  the  Banking  Union  and  with 
international standards.  

➢  Addressing non-prudential barriers to integration 

There are also non-prudential barriers to integration, which are costly to navigate when 
conducting banking business across borders. Absent a harmonised EU framework, national 
insolvency laws remain fragmented and continue to limit the cross-border operations of banks, 
for  example  on  aspects  affecting  loan  collateral  repossession  under  bankruptcy  laws.  Co-
legislators have made progress on specific issues, for example establishing a uniform creditor 
hierarchy under the CMDI framework. As of today, however, more structural and ambitious 
attempts  to  harmonise  insolvency  laws  across  the  Union  have  not  found  consensus  among 
Member States. The Commission is ready and remains committed to working towards further 
harmonising insolvency laws.  

Anti-money  laundering  (AML)  and  some  consumer  protection  rules  have  been  harmonised 
across  the  EU  to  a  large  extent  but  are  often  applied  differently  in  Member  States.  Further 
legislative efforts were carried out to achieve higher level of harmonisation, for example, in 

11 

 
 
 
relation to the recent set up of the Anti-Money Laundering Authority (AMLA) and under the 
new Consumer Credit Directive applicable as of 20 November 202620. 

Non-prudential barriers may discourage banks from offering pan-EU banking products – such 
as  deposits  or  retail  loans  –  and  result  into  additional  costs,  in  particular  generated  by  IT 
systems that need to be adapted to the different national legal orders of 27 Member States. The 
digitalisation  and  technological  advances  for  the  provision  of  banking  services  (i.e.  open 
banking, tokenisation of assets, the impact of artificial intelligence including access to high-
quality data, adaptation of rules to new business models such as deposit platforms, client facing 
apps, e-wallets) can boost competitiveness.  

In this context, the Commission will: 

▪  Work  with  the AMLA  in  implementing  the  EU’s  single AML  rulebook,  which  will 
apply directly in Member States from 10 July 2027 and will harmonise Know Your 
Customer requirements and Suspicious Activity Reporting across the Union.  

▪  Continue  to  monitor  the  national  application  of  consumer  protection  rules  to 
facilitate and foster cross-border activity, ensuring that consumers can more easily 
access a broader offer of bank services, while maintaining an appropriate level of 
protection. 

▪  Assess  if  consumer  protection  rules  are  gold-plated  or  applied  in  a  way  that 

unnecessarily fragments the market.  

▪  Continue  to  monitor  the  potential  of  digitalisation  and  IT  implications  for  the 
banking sector to ensure that the regulatory framework is sufficiently agile to support 
more digitalised banking services and to foster innovation, while preserving cyber-
resilience.   

3.2  Implementing  international  standards  while  taking  account  of  EU 

specificities and ensuring proportionality  

The EU has faithfully adopted international standards and, in certain areas, gold-plated them 
by applying the standards at all levels of consolidation and to all banks, rather than just large, 
internationally active ones. While this approach has significantly increased resilience, it may 
have led to overlook certain EU specificities.  

20  

Directive (EU) 2023/2225 of the European Parliament and of the Council of 18 October 2023 on credit 
agreements for consumers and repealing directive 2008/48/EC (OJ L, 2023/2225, 30.10.2023) establishes 
full  harmonisation  of  consumer  protection  rules  in  the  field  of  consumer  credit,  to  ensure  that  all 
consumers in the Union enjoy a high and equivalent level of protection of their interests and to create a 
well-functioning internal market.  

12 

 
 
 
 
 
 
➢  Implementation  of  international  standards  taking  account  of  EU 

specificities  

The  EU  has  adopted  the  Basel  III  agreement  in  EU  law  since  1  January  2025,  with  a 
number of transitional measures. As one of the largest banking markets, EU supervisors and 
the Commission are engaged in shaping international standards and should proactively work 
towards ensuring that global frameworks take account of different market realities, including 
those of the European banking sector. In addition, the implementation of international standards 
into EU law should take due account of the specificities of the EU banking sector, to help avoid 
disproportionate effects on certain activities or banks and ensure that the framework delivers 
its prudential objectives in an efficient and balanced manner.  

International  level  playing  field  is  essential.  Pending  implementation  elsewhere,  the 
Commission has taken steps to postpone until 1 January 2027 the entry into application in the 
EU of certain aspects of the Basel market risk framework (Fundamental Review of the Trading 
Book). On 4 June 2026, the Commission adopted a delegated act to mitigate some of the effects 
of its application until the end of 2029. The delegated act is now under scrutiny in the Council 
and the European Parliament.  

The  EU  is  progressively  introducing  the  output  floor21,  combined  with  a  number  of 
transitional measures, designed to allow banks and authorities to progressively adapt to 
the Basel agreement. Meanwhile, various approaches have been taken within third-country 
jurisdictions,  including  removing  the  output  floor  altogether.  EU-based  stakeholders  have 
expressed different views on the future of the output floor, including on the appropriate level 
of calibration, the level at which the requirement should apply (solo or consolidated level), the 
scope of risks covered by the framework and how it interacts with the underlying standardised 
approach,  for  instance  in  areas  like  specialised  lending,  project  finance  and  trade-related 
finance.  

Despite  the  SME  support  factor,  the  prudential  treatment  of  unrated  corporates  is  a 
structural  challenge  for  the  EU  regulatory  framework.  Since  EU  companies,  and 
particularly SMEs, mostly rely on bank financing rather than capital markets, the vast majority 
do not hold an external credit rating. The Commission will therefore assess the possibility of 
removing the need for an external rating, with a view to easing access to bank financing for 
such companies. Such an assessment should also examine whether the proposed policy could 
create disincentives for companies to seek a credit rating, thereby undermining transparency 
and  the  long-term  growth  of  deeper  equity  and  corporate  bond  markets  in  the  EU  and 
diminishing the available information for banks to assess risks of corporates. A strategic, long-
term  approach  would  need  to  be  considered  to  achieve  the  fundamental  goal  of  the  SIU  to 
promote more diversified funding sources through the single capital market. .  

21 

The output floor is a regulatory safeguard that limits the extent to which banks can reduce their capital 
requirements with internal risk models, relative to standardised approaches. 

13 

 
 
 
The  prudential  treatment  of  residential  real  estate  exposures  also  requires  careful 
calibration. Requirements in this area can influence access to housing finance, including how 
they impact housing supply, and affect the functioning of specific market segments, while the 
framework must remain risk sensitive. At the same time, it should also be considered that steps 
to increase mortgage lending may push housing prices higher in conditions of limited supply, 
thereby worsening affordability and undermining its intended objective. 

In  other  areas,  to  strengthen  international  competitiveness  and  support  digitalisation, 
amendments to the prudential framework, such as the treatment of software assets, could 
be considered. EU rules require banks to largely deduct software investments from their core 
capital. That approach treats software like a physical cost rather than a competitive business 
asset and is considered by many as putting EU banks at a disadvantage compared with peers in 
other  jurisdictions. Yet,  the  prudence  of  the  EU  approach  can  also  be  seen  as  an  asset  in  a 
moment  when  artificial  intelligence  developments  call  into  question  the  value  of  software 
assets. More broadly, the prudential framework should better reflect the role of intangible assets 
in a modern economy.   

Finally, the competitiveness of the EU banking sector is not only a question of prudential 
considerations,  technology,  and  innovation.  It  also  depends  on  the  banks’  ability  to 
attract,  retain  and  reward  highly  skilled  professionals  in  a  global  market  for  talent. 
Against  this  background,  the  Commission  is  assessing  possible  adjustments  to  the 
remuneration  framework.  Updated  remuneration  rules  could  contribute  to  fostering  the 
competitiveness  of  the  EU  banking  sector  while  ensuring  that  remuneration  policies  do  not 
provide incentives for excessive risk-taking.  

In this context, the Commission will: 

▪  Make clear proposals regarding the output floor and its transitional arrangements 
on unrated corporates and mortgage lending on the competitiveness of EU banks, as 
well as its interaction with the other parts of the framework, including measures to 
properly balance resilience and the broader financing of the economy. 

▪  Continue  to  monitor  the  implementation  of  international  standards  across 
jurisdictions  and  implement  a  long-term,  strategic,  EU  approach  to  market-risk 
capital  requirements,  based  on  the  experience  gathered  and  on  level  playing  field 
considerations. 

▪  Evaluate  the  regulatory  treatment  of  strategic  investments  through  specialised 
lending, including project finance for infrastructures and the energy transition, as 
well  as  the  regulatory  treatment  of  trade  finance  with  a  view  to  ensuring  that 
European  banks  can  support  European  companies  and  strengthen  supply-chain 
security.  

▪  Propose  a  revision  of  the  prudential  treatment  of  banks’  investments  in  software 
assets to ensure that the framework is prudentially sound, consistent with the digital 
and cyber-risk environment and that it provides the correct incentives for banks to 
invest in innovation and digital resilience. 

14 

 
 
▪  Explore  potential  areas  of  action  to  ensure  access  to  lending  for  IP-intensive 
companies  and  more  broadly  for  the  immaterial  economy,  including  by  inviting 
relevant stakeholders to reflect on capacity building programs, valuation frameworks 
and  risk-sharing  mechanisms.  This  work will  take  into  account  the  upcoming  IP-
related actions in the Startup and Scaleup Strategy, such as the European Innovation 
Act. 

▪  Assess possible adjustments to the current remuneration framework for material-risk 
takers and its impact on the EU banking sector. The Commission is assessing how to 
reduce  unnecessary  burden  and  complexity,  address  unintended  effects  on  pay 
structures,  prevent  distortions  in  competition  for  specialised  talent  and  adapt  the 
framework to systemic risks. 

➢  Ensuring proportionality in the regulatory framework 

Europe needs large banks capable of competing internationally in markets where scale is 
essential but also benefits from smaller more locally oriented banks. Smaller banks play a 
role to support EU investment priorities and SME financing at local level, including in less 
developed regions, building up on proximity and ultimately boosting the lending offer.  

The  EU  regulatory  framework  recognises  the  specificities  of  smaller  and  non-complex 
banks,  but  complexity  in  the  framework  may  still  impact  smaller  banks  in  a 
disproportionate way. A regime  better tailored  to  small  and  non-complex banks should  be 
measurably  simpler  and  less  burdensome  in  terms  of  compliance  costs,  while  preserving 
adequate  risk-based  requirements,  safeguard  financial  stability  and  maintain  incentives  to 
improve risk management practices.  

In this context, the Commission will: 

▪  Propose a regime in CRR that allows small and less complex banks to be more clearly 
their  legal  and 
the  regulatory  framework,  regardless  of 
identified  within 
organisational structure, possibly adjusting current criteria and thresholds to reflect 
the reality of the EU banking sector, with less, adapted and simpler requirements in 
the  relevant  frameworks  for  the  prudential,  macroprudential  and  resolution 
dimensions. Such a regime should also enable the EBA to work on Level 2 and Level 
3 measures in a way that caters more effectively for small and less complex banks, 
with a reduced number of requirements and processes. 

▪  In the context of completing the Banking Union, the Commission will continue its 
dialogue  with  the  SSM  and  SRB  on  the  efficient  application  of  proportionality, 
including in relation to the particular circumstances that justify the qualification of 
credit institutions as being less significant, despite meeting the default significance 
criteria in the SSM Regulation. 

In  addition,  investment  firms  contribute  to  the  diversity  and  depth  of  the  capital  market  by 
offering services that both complement and compete with those of credit institutions, such as 
providing liquidity, contributing to an efficient allocation of capital and supporting the issuance 

15 

 
 
 
of equity and debt securities. Any unjustified obstacles within the regulatory framework to the 
contribution of investment firms must also be addressed. The joint EBA and ESMA opinion on 
the  functioning  of  the  prudential  framework  for  investment  firms22  concluded  that  the 
regulation meets its original objectives, while suggesting targeted amendments.  

In this context, the Commission will: 

▪  Propose  targeted  changes  to  the  prudential  framework  for  investment  firms, 
including  in  the  threshold  structure,  governance  and  remuneration  requirements, 
and review the calibration of capital and liquidity requirements. 

3.3   Simplifying the regulatory framework 

Making  the  regulatory  framework  simpler  can  bring  tangible  benefits  for  banks  and 
supervisory  authorities  without  undermining  resilience.  The  framework  has  been  made 
more complex by successive revisions of the microprudential, resolution and macroprudential 
rules, often conducted independently with insufficient attention to how they interact. Measures 
are  now  required  to  remove  excessive  granularity,  overlaps  and  inconsistencies  within  and 
between  the  various  sets  of  rules.  But  reducing  undue  complexity  should  not  lead  to  de-
regulation that fundamentally undermines the resilience of the banking sector, as resilience is 
a precondition for the sector’s competitiveness.  

Furthermore, reporting under the regulatory framework has become unduly burdensome and 
costly. Any reports that are not proportionately helping to improve resilience and integration 
should be reduced or removed from the regulatory framework. 

➢  Microprudential rules 

Microprudential rules include Pillar 1 requirements, Pillar 2 requirements and Pillar 2 
guidance. Pillar 1 requirements determine the statutory levels of capital to be held by a bank. 
Pillar 2 requirements set bank-specific levels of capital, while Pillar 2 guidance is also bank-
specific but is non-binding and reflects supervisory expectations of the total level of capital 
banks  should  maintain  to  withstand  periods  of  stress.  Apart  from  risk-based  requirements, 
supervisors can also set Pillar 2 leverage ratio requirements.  

Concerns have been expressed about the current design and application of Pillar 2 requirements 
and guidance, especially about possible overlaps with other requirements which can lead to 
double  counting.  Concern  has  also  been  expressed  about  limited  transparency  in  the 
methodologies used to set Pillar 2 requirements and guidance, leading to a demand for a clearer 
explanation of decisions, increased clarity and incentives relating to remediation and a better 
reflection of underlying risks.  

The SSM has already committed to implementing a series of improvements relating to 
Pillar  2  requirements  and  guidance.  It  has  recently  implemented  a  new  methodology  for 

22 

European Banking Authority (2025), The EBA and ESMA recommend targeted revisions to the 
investment firms’ prudential framework. 

16 

 
 
 
 
Pillar 2 requirements and has proposed a reform agenda intended to increase the efficiency, 
effectiveness and risk-based focus of prudential supervision more generally. These reforms are 
an important step in ensuring an appropriate supervisory review framework. To complement 
those ongoing efforts, further steps might be considered to ensure that supervisory requirements 
remain risk-based and proportionate, while avoiding unnecessary complexity or overlaps with 
other aspects of the capital framework.  

In this context, the Commission will: 

▪  Propose  measures  to  enhance  the  functioning  of  Pillar  2  guidance  to  ensure  its 

targeted application. 

▪  Propose to remove Pillar 2 capital requirements related to the leverage ratio.  

➢  Resolution rules 

EU resolution rules require banks to hold a minimum amount of own funds and eligible 
liabilities (MREL) to ensure they can absorb losses in the event of failure. While this has 
increased the resilience of EU banks, the current MREL design has become complex and, in 
some  cases,  duplicative,  notably  with  different  eligibility  criteria  and  calibration  between 
MREL requirements and the Total Loss-absorbing Capacity (TLAC)  requirements  linked to 
international standards. This complexity hinders predictability and consistency and impacts the 
level playing field across EU banks.  

The resolution  rules  also include  ancillary provisions, derived  from  the own funds’ regime, 
which  are  sometimes  unduly  complex  for  MREL  instruments.  For  instance,  the  prior 
permission  regime,  designed  to  protect  banks’  loss-absorbing  capacity,  has  imposed 
administrative burdens on banks and resolution authorities. Although the SRB has proposed a 
new streamlined approach to accelerate the granting of these permissions for banks willing to 
buy back or replace their MREL instruments, further improvements are needed.  

In addition to determining MREL requirements, the SRB and national resolution authorities 
are required to draw up resolution plans for banks. This is a lengthy and burdensome process, 
which  does  not  reflect  the  fact  that  after  several  iterations,  bank  resolution  plans  are  more 
mature today and could be streamlined to free up resources in banks and authorities to focus 
on operationalisation and testing of plans.  

In this context, the Commission will: 

▪  Propose to revise the MREL framework, bringing it closer to international standards 
by  eliminating  unnecessary  discrepancies  with  the  TLAC  standard  and  by 
introducing  a  simpler,  more  automatic  and  predictable  calibration.  The  revised 
framework will preserve the resilience of the resolution framework, retain incentives 
for resolvability, and ensure that requirements are proportionate, in particular for 
smaller banks. 

▪  Propose a streamlined process for granting permissions to banks in a sound financial 
position  to  speed  up  authorisation  of  buybacks  and  liability  management,  reduce 

17 

 
 
 
compliance  costs  and  increase  flexibility,  while  maintaining  resolvability  and 
adherence to the TLAC standards. 

▪  Propose that certain assessments in the resolution planning phase – including those 
on frequency of resolution planning cycles or the related adoption procedures – are 
made more proportionate to reflect the fact that resolution planning activities have 
matured since the crisis management framework was introduced. 

➢  Macroprudential rules 

National  authorities  are  responsible  for  setting  macroprudential  measures,  while 
considering the specificities of their banking sectors and economic cycles, with a toolkit 
including capital buffers, a risk weight adjustment toolkit and borrower-based measures. 
The most impactful macroprudential measures are capital buffers, which are set in addition to 
Pillar  1  and  Pillar  2  requirements  and  may  be  used  by  banks  in  time  of  distress  to  avoid 
deleveraging  and  to  preserve  lending  to  the  economy.  This  decentralised  framework  has 
become  particularly  complex  in  the  absence  of  a  harmonised  EU  methodology,  reflecting  a 
high number of capital buffers, a design of the buffers catering to specific risks and events, 
national discretion in setting the level of buffers and identifying banks subject to buffers. The 
lack of predictability and consistency in the application of this framework can weigh on banks’ 
business  decisions,  especially  for  cross-border  activity,  consolidation  or  reorganisation. 
Moreover, the multilayered governance involving EU and national authorities creates further 
complexity. The recommendations of the ECB’s High-Level Task Force on Simplification23 as 
well as the replies to the targeted consultation confirm these challenges.  

In this context, the Commission will: 

▪  Propose to revise the macroprudential framework  to ensure a simpler toolbox and 
greater  convergence  and  consistency  in  the  application  of  macroprudential  tools 
across  the  EU.  More  specifically,  the  number  of  buffers  (countercyclical  buffer, 
systemic risk buffer) should be reduced and their design and calibration improved. 
The  framework  for  other  systemically  important  institutions  (O-SII)  should  be 
harmonised  by  addressing  shortcomings  in  the  O-SII  identification  and  buffer 
calibration.  

➢  Interaction  among  microprudential,  resolution  and  macroprudential 

rules 

Microprudential, macroprudential and resolution rules are implemented autonomously 
by different relevant authorities but interact in ways that often result in duplicative and 
inconsistent requirements. This outcome overburdens banks through overlapping layers of 
capital that are set for different purposes but may in some cases address the same risks and 

23 

European Central Bank (2025), Simplification of the European prudential regulatory, supervisory and 
reporting framework. 

18 

 
 
 
 
 
impose undesirable constraints on the use of capital buffers in times of stress. For example, 
double-counting  of  certain  instruments  to  comply  with  capital  buffers  and  other  minimum 
requirements  (leverage  ratio  and  MREL)  can  prevent  banks  from  using  buffers  without 
breaching  requirements.  Investor perceptions  and profitability concerns  can also  complicate 
buffer usability. To address these challenges, the relevant authorities need to adopt a holistic 
approach to setting microprudential, resolution and macroprudential requirements. While the 
authorities should retain discretion, the setting of requirements should be more predictable and 
transparent to allow banks to perform more efficient capital planning and  to offer increased 
transparency to the financial market.  

In this context, the Commission will:  

▪  Propose  stronger  coordination  mechanisms  between  authorities  responsible  for 
implementing microprudential, resolution and macroprudential rules to ensure that 
requirements  are  set  coherently  and  are  subject  to  reinforced  and  clearer 
accountability.  Authorities  will  need  to  enhance  coordination  and  exchange  of 
information,  reflecting  a  holistic  perspective  on  both  overall  capital  needs  for  the 
system as a whole and for the bank in question. 

▪  Review  the  procedure  to  amend,  where  necessary,  technical  standards  across  the 
framework,  strengthen  the  requirement  for  impact  assessments  by  the  EBA  and 
enhance  accountability/control  mechanisms  on  how  mandates  are  granted  and 
applied. 

▪  Propose to move certain microprudential, resolution and macroprudential rules into 
directly  applicable  regulations  to  enhance  clarity,  supervisory  convergence  and 
reduce the administrative burden for banks.  

➢  Streamlining reporting and disclosure requirements 

While reporting and disclosure requirements are essential for a well-functioning banking 
sector, the reporting framework for banks has become very burdensome. Total reporting 
costs for EU banks, comprising all expenditure related to the operation of the reporting system 
(staff, IT, legal, accounting, auditing and consultancy services) have been estimated at EUR 
11.2  billion  per  year24. The  reporting  burden  stems  from  the  frequent  changes  of  reporting 
requirements, unnecessary complexity, the lack of clarity and consistency, and duplication of 
reporting stemming from the limited data sharing among authorities.  

Significant  steps  have  already  been  taken  to  simplify  and  streamline  reporting 
requirements, in line also with the Commission’s strategy on supervisory data25. These 
include legislative changes to simplify the reuse of supervisory data for disclosures and other 
measures  to  significantly  ease  the  reporting  burden  for  small  and  non-complex  institutions 
(Pillar  3  Data  Hub),  the  Better  Data  Sharing  Regulation  which  will  curb  duplicative  data 

24 

25 

European  Banking  Authority  (2021),  Study  of  the  cost  of  compliance  with  supervisory  reporting 
requirements. 
European Commission (2021), Strategy on supervisory data in EU financial services. 

19 

 
 
 
 
requests and require EU authorities to regularly review and remove redundant reporting and 
also  advance  on  their  efforts  on  integrated  reporting26,  and  the  Omnibus  I  package  and 
subsequent  simplifications  of  the  EU  taxonomy  and  European  Sustainability  Reporting 
Standards27.  The  European  Single  Access  Point,  once  up  and  running,  will  also  improve 
accessibility and reduce duplication by facilitating centralised electronic access to public data 
about banks and their products. The Commission will continue to engage with the EBA to make 
sure that prudential reporting and disclosure requirements are proportionate and consistent with 
the broader sustainability framework.  

Furthermore,  EBA  has  already  implemented  several  substantive  measures  to  reduce  the 
reporting burden for banks. Together with additional measures proposed in 2026, the number 
of data points in EU reporting frameworks is expected to be cut by 50%28. Despite this progress, 
stakeholders  confirm  the  need  for  further  streamlining,  with  the  priorities  being  reporting 
integration, proportionality and a technological upgrade.  

In this context, the Commission will: 

▪  Support  the  transition  from  the  current  reporting  approach  to  more  integrated 
prudential,  statistical,  and  resolution  reporting,  with  robust  governance 
arrangements  and  a  common  data  dictionary  as  cornerstones  and  incentivise  the 
relevant authorities, advised by the Joint Bank Reporting Committee, to proceed with 
the technical work and deliver tangible improvements.  

▪  Considering all options available to improve the competitiveness of the EU banking 
sector  including  potentially  reviewing  the  mandate  of  the  EBA,  propose  targeted 
legislative  changes,  where  needed,  to  mandate  the  EBA  to  deliver  further 
proportionality,  simplification  and  automation  of  reporting  on  a  technical  level, 
including  as  regards  materiality  thresholds  for  minor  reporting  errors  and  other 
aspects that unduly increase the reporting burden.  

▪  Propose amendments to the EBA Regulation regarding Level 2 acts, mirroring those 
introduced  in  the  proposal  to  amend  the  ESMA  Regulation  under  the  Market 
Integration  and  Supervision  Package  (MISP).Invite  the  EBA  to  revamp  its  single 
interactive  rulebook  by  linking  all  Level  3  Guidance  and  Q&As  directly  to  the 
corresponding provisions of the legal framework on its website, thereby improving 
accessibility and transparency. As part of this process, the EBA could audit existing 
Q&As and remove those that are outdated. 

▪  Support  the  EBA  and  other  authorities  to  regularly  review,  reduce  and  remove 

duplicative reporting, in line with the Better Data Sharing Regulation.  

26 
27 

28 

OJ L, 2025/2088, 21.10.2025, ELI: http://data.europa.eu/eli/reg/2025/2088/oj 
Proposal  for  a  Directive  of  the  European  Parliament  and  of  the  Council  amending  Directives  (EU) 
2022/2464  and  (EU)  2024/1760  as  regards  the  dates  from which  Member  States  are  to  apply  certain 
corporate sustainability reporting and due diligence requirements, COM/2025/80 final 
European Banking Authority (2026), Efficient reporting: simpler, smarter, proportionate. 

20 

 
 
 
▪  Work  with  national  authorities  to  limit  additional  national  reporting,  as  this  adds 
significant  complexity  and  increases  the  burden  for  reporting  entities.  Incentivise 
national authorities to make full use of the option to share data under the Better Data 
Sharing Regulation.  

4. Competitiveness as a shared responsibility  

Enhancing the competitiveness of the EU banking  sector will require a culture change 
among all relevant stakeholders. Banking-sector risks must be well managed, especially in 
the current context where the more established risks relating to credit, operations and market 
developments  are  now  compounded  by  newer  risks  related  to  cyber  activity,  geopolitical 
tensions, environment and climate threats. However, risk management should focus on material 
threats, moving away from strictly compliance-based approaches to deliver a more efficient, 
holistic and focused approach to risk management.  

The Commission should more proactively monitor and ensure adequate balance between risk-
taking  and  financial  stability,  to  ensure  the  framework  and  its  application  do  not  hinder 
competitiveness and growth. Regulators and supervisory authorities should focus on risks that 
matter most for overall financial stability, and avoid a zero risk tolerance culture, as this could 
hinder  banks  in  supporting  economic  activity.  Policymakers  should  refrain  from  retaining 
national specificities that fragment the market. Accountability instruments should be used to 
the maximum extent, and, if ineffective, reinforced.  

The  Commission  is  the  primary  EU  institution  responsible  for  executing  the  EU’s 
competitiveness and competition mandate. Going forward, the Commission will reinforce 
the use of its responsibility to regularly review the functioning of European banking  system 
and  its  impact  on  the  internal  market,  helping  to  ensure  that  supervisory,  and  resolution 
activities remain effective, proportionate and supportive of the smooth functioning of the single 
market and EU competitiveness29 . The Commission is working with EBA to ensure that its 
supervisory  guidance,  in  particular  when  subject  to  comply  and  explain  processes,  is 
proportionate.  

At the same time, banks, their senior managers and staff, as well as auditors and accountants 
must be willing to be part of this cultural shift and take more responsibility for applying the 
law based on materiality. While regulators and supervisors should take a more proportionate 
approach and act to reduce the complexity, the length and the level of detail of their measures 
– be it law, guidance or Q&As – banks need to play their part by refraining from continuous 
demands for guidance in search of an ever-higher degree of legal certainty. Compliance with 
the law should be grounded on its underlying substance rather than approached as a tick-the-
box exercise. It is a shared responsibility to change the behaviours that have collectively created 
a  banking  environment  that  is  hyper-prescriptive,  overly  complex  and  dominated  by  risk-
aversion.  

29  

Article 32 of Regulation (EU) 1024/2013 and Article 94 of Regulation (EU) 806/2014. 

21 

 
 
 
 
In this context, the Commission will:  

▪  Work with the EBA, supervisors and market participants to draw a clearer distinction 
between  requirements  –  which  require  compliance  –  and  non-binding  guidance 
harmonising the way requirements are applied.  

▪  Consider a mandate for the EBA and for the ESRB to regularly produce reports on 
the adequacy of bank capital requirements across the EU to reinforce the existing 
accountability processes (in the context of European and national Parliaments, as 
well as of the Council and national governments).  

▪  Work  with  EU  and  national  authorities  to  ensure  that  supervisory  practices  are 
neutral  with  respect  to  the  organisational  model  of  a  bank  and  do  not discourage 
cross-border  banking  activity,  including  via  branches  and  the  free  provision  of 
services. 

▪  Organise  regular  discussions  with  the  SSM  and  SRB,  and  potentially  with  other 
relevant stakeholders to discuss the functioning of the banking system and the impact 
of  supervisory  and  resolution  actions  on  the  smooth  functioning  of  the  internal 
market.  

5. Engagement and next steps 

In  this  Communication,  the  Commission  has  outlined  a  way  forward  to  a  more 
competitive  EU  banking  sector  that  will  connect  savings  to  investments  more  efficiently, 
better  exploit  the  potential  of  both  cross-border  and  domestic  markets  and  ensure  that 
households  and  businesses  have  the  widest  choice  of  financing  options,  lowest  costs  and 
highest returns. A more competitive banking sector must be resilient, profitable and open to 
competition  and  innovation.  Delivering  this  way  forward  will  imply  a  significant, 
encompassing and forward-looking reform, focused on high-impact improvements.  

The  Commission  recognises  the  ambition  of  the  co-legislators  to  reform  the  banking 
framework and strengthen the competitiveness of EU banks, as put forward in the European 
Council conclusions of December 202530 and March 202631, as well as the Parliament’s annual 
report on the Banking Union32.  

The  Commission  therefore  encourages  all  stakeholders  to  be  ambitious  in  implementing 
necessary reforms and welcomes feedback on this Communication as it prepares measures to 
be proposed in the first quarter of 2027.  

European Council (December 2025), Conclusions on Simplifying the Union’s Financial Services 

30  
Regulation 
31  
32  

European Council Meeting Conclusions (March 2026)  
European Parliament (April 2026), Banking Union Annual Report 2025 

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