The European Commission called for reforms in a report released on Friday to enhance the competitiveness of the region's banking industry, setting the stage for a possible major revision of EU banking regulations that could release billions in funding.

Even after ten years of advances through the Banking Union, Europe's banking landscape stays divided by national lines. The Commission maintains that this division restricts banks from effectively serving businesses and households throughout the EU.

The report suggests steps to promote greater cross-border activity, streamline oversight procedures and strengthen ties between EU capital markets and the Savings and Investments Union. It comes after a year of Commission efforts to simplify regulations, which Brussels insists will avoid deregulation despite scaling back some prior EU measures.

The Commission estimates that clearing these obstacles could support the bloc's roughly 1.2 trillion euros in yearly investment requirements, covering areas such as clean technology, defense and artificial intelligence.

National regulators may cede ground on bank oversight

The ideas would limit national flexibility as banking standards align more closely at the EU level. National bodies might exercise reduced authority over capital and liquidity at local subsidiaries, along with narrower ability to halt or condition cross-border deals.

Deposit safeguards and bank resolution processes could also shift toward greater EU coordination.

The Commission notes that a unified banking market cannot function if nations keep layering on, interpreting or applying rules unevenly. The adjustments might also lower capital buffers some banks must maintain for loss absorption.

Releasing resources for lending

Cross-border banking groups must currently satisfy capital and liquidity rules at both parent and subsidiary levels, often locking resources within specific countries.

The Commission seeks to grant parent-bank supervisors stronger influence over full banking groups.

For entities like UniCredit, BNP Paribas and Santander, the ECB would share these responsibilities with national supervisors. Smaller groups would typically stay under national oversight, subject to ECB monitoring inside the Banking Union.

Parent banks would need to guarantee subsidiaries hold adequate resources in both routine times and crises. The Commission indicates these shifts could unlock capital, lower compliance and funding expenses, expand lending and support cross-border growth.

Yet the Commission underlined that protections for creditors and depositors must stay in place. The report notes: "Steps to remove prudential barriers to integration require suitable safeguards to preserve financial stability across the EU."

The Commission further intends to introduce steps discouraging banks from concentrating too much sovereign debt from one country and promoting diversification of government bond holdings.

Securing deposits

The Commission intends to examine the deposit-insurance system to deliver consistent coverage for protected deposits across the Banking Union. The revisions would also aim to stop cross-border bank failures from imposing costs on individual member states, national finances or deposit-guarantee schemes.

The Commission additionally seeks to improve predictability in resolving failing cross-border banks, enable more efficient fund movement within groups under stress and reinforce emergency liquidity assistance.

Additional adjustments

Variations in applying anti-money laundering and consumer protection standards across the EU raise costs for banks operating across borders and offering EU-wide services. Banks often require separate IT systems and procedures to meet differing national rules.

The Commission will advance further alignment, including uniform anti-money laundering standards starting in July 2027. It will also review whether national consumer protection rules create unnecessary market splits and evaluate ways regulation can aid digital banking and innovation while upholding consumer safeguards and cybersecurity.

The Commission's report prepares the ground for proposals expected in the first quarter of 2027.