The European Commission has unveiled a set of far-reaching proposals designed to dismantle national barriers within the European Union's banking sector. Despite a decade of development under the Banking Union, the market remains fragmented, which Brussels argues hinders the ability of banks to effectively support households and businesses across the bloc. By streamlining supervisory rules and fostering closer integration with the Savings and Investments Union, the Commission hopes to unlock up to €1.2 trillion in annual investment, specifically targeting needs in artificial intelligence, clean technology, and defence.
These reforms aim to harmonize banking regulations at the EU level, thereby reducing national discretion. Under the new framework, national authorities would see a decrease in their power to block cross-border mergers or impose specific conditions on local subsidiaries. Furthermore, the proposals suggest that the European Central Bank (ECB) would exercise greater oversight alongside national authorities for large banking groups such as Santander, BNP Paribas, and UniCredit. Smaller institutions would generally remain under national supervision, though still within the broader Banking Union framework.
A core component of the plan involves changing how capital and liquidity are managed. Currently, cross-border banking groups must meet requirements at both the parent and subsidiary levels, often leaving significant resources tied up in individual countries. The Commission intends to allow parent banks to have more authority over their groups, provided they ensure subsidiaries remain sufficiently resourced during both normal operations and periods of stress. This shift is expected to reduce compliance costs, facilitate lending, and encourage cross-border expansion.
While the Commission emphasizes that these changes do not constitute deregulation, it maintains that safeguards for depositors and creditors remain a top priority. The report explicitly states that any measures addressing prudential barriers must be paired with safeguards to ensure financial stability across the union. Additionally, the proposal includes plans to limit the amount of debt banks can hold from a single government, encouraging more diversified sovereign bond portfolios. The Commission also intends to review the deposit-insurance framework to ensure uniform protection and prevent failing cross-border groups from burdening national budgets or taxpayers.
Future initiatives will include common anti-money laundering regulations starting in July 2027 and assessments of how national consumer protection rules might be fragmenting the market. The Commission also plans to examine how regulation can better support digital banking and cybersecurity. These proposals set the stage for formal legislative measures expected in the first quarter of 2027.
