EBA responds to EU Commission consultation on banking sector competitiveness

The European Banking Authority (EBA) has contributed to the European Commission’s targeted consultation on the competitiveness of the EU banking sector. The EBA responded to 43 of the 95 questions posed, drawing on its ongoing work and the report on the efficiency of the regulatory and supervisory framework published on October 1, 2025.

The response highlights the resilience of the EU banking sector, supported by institutional and regulatory measures since the financial crisis. The 2025 EU-wide stress test demonstrated banks’ ability to withstand adverse shocks while maintaining lending activities, which is vital for the EU economy.

The EU banking landscape is diverse in size, geography, and business models. This diversity supports stable funding, sound capitalisation, and resilient profitability. The presence of foreign financial institutions in the EU, holding significant market shares in segments like derivatives, is also acknowledged.

EU banks face a volatile macroeconomic environment with geopolitical tensions, trade disruptions, and market volatility impacting asset quality and profitability. Sectoral vulnerabilities include exposures to non-bank financial institutions and transitional challenges related to digital transformation, sustainability, and demographic changes.

The digital transition is transforming banking operations through increased competition and technological integration, including artificial intelligence, cloud computing, and Big Data analytics, which introduce new risks.

The EBA’s TFE report emphasizes four principles for regulatory simplification: maintaining resilience through Basel III standards, leveraging the Single Market, finalizing the Banking Union, and ensuring a level playing field with proportionality and avoiding fragmentation.

EU banking rules have enhanced stability and the single market but are complex, involving multiple layers of regulations and supervisory guidance. The EBA advocates for more supervisory convergence and a review of the existing rulebook to ensure consistency and coherence across levels.

The EBA is developing analysis and proposals in key areas, including:

• Regulatory mandates production
• Review of the single rulebook by building blocks

Specific initiatives include:

• Consultation until 10 May 2026 on a discussion paper to consolidate credit risk regulations
• Consultation until 26 May 2026 on governance and remuneration, including suitability assessments
• Expected simplifications in ESG risk assessments by end-2026
• Streamlining supervisory processes and stress testing, with updates expected by Q2 2026

In reporting, the EBA is developing an integrated cross-sectoral reporting system through the Joint Bank Reporting Committee (JBRC) with the ECB, aiming to improve data standardization and reduce reporting costs by 25%. It is also consulting until 10 July 2026 on proposals to reduce reporting data points by 50%, especially for smaller institutions.

The EBA is establishing a public EU repository of data requests from authorities to enhance transparency and facilitate data sharing. It is also working on proposals to harmonize data request practices across authorities, reducing the reporting burden for banks.

To increase predictability, the EBA is implementing measures to improve impact assessments and reduce the frequency of reporting changes, building on recommendations from the 2021 Cost of Compliance report.