ECB calls for Single Market boost to strengthen EU banks

The European Central Bank (ECB) today published proposals aimed at strengthening the competitiveness of euro area banks and their financial infrastructure.

These proposals, endorsed by all euro area central banks, constitute the ECB Governing Council's response to the European Commission's public consultation on the EU banking sector's competitiveness.

Building on the Governing Council's December 2025 simplification proposals, the ECB stresses that the euro area must operate as a single jurisdiction for financial regulation.

This includes synchronized progress on the banking union, concrete steps towards a European Deposit Insurance Scheme (EDIS) with a clear timetable, and allowing capital and liquidity to flow freely within cross-border banking groups.

Policymakers are also urged to foster deeper capital markets through a savings and investments union.

"Euro area central banks are united: the crucial step to strengthen Europe's competitiveness is a truly single banking market where capital and liquidity can move across borders and all deposits are protected equally," said Luis de Guindos, Vice-President of the ECB.

The ECB stresses that simplifying regulation must address undue complexity without compromising resilience.

Post-global financial crisis reforms, including backstops like the output floor and prudential treatment of non-performing loans, were crucial for restoring confidence and should be maintained.

The Governing Council proposes concrete changes to EU banking rules: shifting from directives to directly applicable regulations, merging five macroprudential buffers into two, increasing proportionality for small banks, and streamlining reporting.

Capital requirements for euro area banks are broadly comparable internationally and have not hindered lending capacity.

The goal is to strengthen banks' business models and resilience through better integrated markets and cross-border competition.