„Capital movement is a way to achieve Europe’s growth. Our union of savings and investments needs a strong and competitive banking sector. Today’s communication marks a clear step in this direction – it revises our approach to risk and creates conditions for economic growth and innovation, while maintaining financial stability,“ said EC President Ursula von der Leyen.
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According to the EC, the aim is to create a more integrated, effective, and competitive banking sector that can strengthen the European economy by financing growth, innovation, and strategic priorities, based on a better-balanced regulatory system that allows banks to take prudent risks while ensuring sector resilience, providing better services to households and businesses, maintaining financial stability, and promoting sustainable growth.
To increase competitiveness, a change in banking philosophy is needed – moving towards responsible, measured risk-taking. Simplifying the regulatory system, integrating the single market, and creating a banking union would help EU citizens and businesses access better products and services at more competitive prices, the communication states.
Main measures
The communication sets out the main measures based on three objectives.
The first objective is to remove barriers to cross-border banking activities and promote market integration. The communication outlines how to reduce prudential and non-prudential cross-border barriers so that EU banks can achieve the scale needed to compete globally. This would include measures such as:
allowing cross-border banking groups to use capital and liquidity more effectively across the EU – groups could then direct excess funds where they can be more productive without reducing their ability to finance the local economy and without impacting financial stability across the single market and in each Member State individually;
strengthening common safeguards – the European Commission will seek to increase trust in the financial system and supervisory authorities by proposing a simpler and more effective common deposit protection mechanism within the banking union. This would replace the 2015 proposal for a European deposit insurance scheme and be based on existing central and national protection systems, which are now fully funded;
closer monitoring of the EU’s anti-money laundering and consumer protection systems and their implementation at the national level – making it easier for banks to provide cross-border services.
The second objective is to implement international standards while taking into account the EU’s specificities and proportionality. The EU remains committed to applying international standards while better reflecting the characteristics of the EU banking sector. To maintain a level playing field internationally and help EU banks compete globally, the communication sets out the following measures:
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a new assessment of how the EU implements certain international standards, which in some cases may limit the lending capacity of EU banks;
possible review of certain prudential and corporate governance rules to better reflect the characteristics of EU banks related to bank size, business models, and activities.
The third objective is to simplify the banking regulatory system to achieve the broader European Commission goal of reducing administrative burden. Confidence in the banking system depends on strict safeguards, but unnecessary complexity should be reduced, and requirements should be more predictable and transparent for both banks and authorities. The communication primarily emphasizes:
simplification of capital structure and further alignment of banks’ macroprudential buffers;
restructuring and standardization and simplification of processes;
adjustment of criteria and limits applied to small and non-complex institutions and tailoring their requirements.
The EC has asked stakeholders to provide their opinions or comments in the coming months. The Commission plans to propose a set of measures in the first quarter of the coming year to partially amend the banking regulatory system and implement this communication, taking into account the objectives of the “One Europe, One Market” action plan. Furthermore, the communication calls on Member States, supervisory authorities, and the banking sector to continue efforts to increase banking competitiveness.
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