The European Commission has outlined a series of measures to strengthen the competitiveness of the EU’s banking sector, with the aim of building a ‘more integrated, efficient, and competitive banking sector that can strengthen Europe‘s economy’.
The Commission has adopted a Communication on the competitiveness of the EU banking sector as part of its Savings and Investments Union (SIU) strategy, which is intended to support bank investment in areas including innovation, clean technologies and defence, while maintaining financial stability and strengthening the Single Market.
‘Strong, competitive sector’
“Getting capital flowing is how we will get Europe growing,” commented Ursula von der Leyen, European Commission president.
“Our Savings and Investments Union needs a strong, competitive banking sector at its heart. And today’s Communication takes a clear step in this direction, recalibrating our approach to risk, and enabling growth and innovation while maintaining financial stability.”
The Commission argues that Europe’s banking sector remains constrained by fragmentation across national markets, limiting the ability of banks to expand across borders and compete internationally.
It also says aspects of the EU’s implementation of Basel III banking standards and the complexity of existing prudential rules reduce lending capacity and increase administrative burdens.
“Today, as part of the Savings and Investments Union strategy, we set out a clear path to a more integrated, efficient and competitive banking sector,” added Maria Luís Albuquerque, Commissioner for Financial Services and the Savings and Investments Union.
“Simplifying rules and making them more proportionate matters, but it will not be enough. EU banks need the right conditions to scale up, consolidate and compete globally.”
Core priorities
The proposed reforms are built around three core priorities.
The first focuses on encouraging greater cross-border banking activity within the EU. The Commission plans to reduce barriers that limit cross-border operations, allowing banking groups to use capital and liquidity more efficiently across Member States while maintaining financial stability.
As part of this objective, the Commission intends to develop a simpler common deposit protection mechanism within the Banking Union, replacing its 2015 proposal for a European Deposit Insurance Scheme. It also plans closer monitoring of anti-money laundering and consumer protection rules to make it easier for banks to provide services across borders.
The second priority is to ensure international banking standards continue to be implemented while taking greater account of the specific characteristics of the European banking sector. The Commission will reassess elements of the EU’s implementation of Basel III where it believes current rules may unnecessarily restrict lending, and will examine possible revisions to prudential and corporate governance requirements to better reflect differences in bank size, business models and activities.
The third pillar centres on simplifying the regulatory framework. Proposed measures include streamlining capital requirements, further harmonising macroprudential buffers, simplifying bank resolution rules and updating the criteria used to classify small and non-complex financial institutions so that regulatory requirements better reflect their size and risk profile.
The Commission says these changes are intended to reduce unnecessary administrative costs while maintaining the safeguards needed to preserve confidence in the financial system.
“The challenges are clear. Now we need the collective determination to act,” Albuquerque added. Read more here.
