ECB Governing Council promotes single market to enhance bank competitiveness

The European Central Bank (ECB) today published proposals aimed at improving the ability of banks and the financial infrastructure to support the economy. These proposals are endorsed by all euro area central banks and respond to the European Commission’s public consultation on EU banking sector competitiveness.

The proposals, published in December 2025, focus on simplifying EU banking rules and are part of the ECB Governing Council’s response. They should be read together with the earlier proposals.

Resilient banks are essential for the euro area’s long-term growth and competitiveness, especially in uncertain environments. Competitiveness depends on harmonisation, integration, and scale, not deregulation. Currently, unnecessary complexity and cross-country fragmentation hinder progress.

To address these issues, the euro area must operate more as a single jurisdiction regarding financial regulation. The Governing Council calls for synchronized progress on key components, including concrete steps toward establishing a European Deposit Insurance Scheme (EDIS) with a clear timetable. Capital and liquidity should flow freely within cross-border banking groups. Policymakers are also urged to advance the savings and investments union to foster deeper capital markets.

Luis de Guindos, Vice-President of the ECB, stated, “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.”

Claudia Buch, Chair of the ECB’s Supervisory Board, emphasized that better integrated markets and increased cross-border competition can enable banks to achieve economies of scale, diversify activities, and strengthen resilience, provided that financial stability safeguards are maintained.

Efforts to simplify regulation must address undue complexity without weakening resilience. Post-global financial crisis reforms have made banks more resilient without restricting their ability to finance the economy. Measures like the output floor and prudential treatment of non-performing loans remain vital for risk coverage.

Capital requirements for euro area banks are broadly aligned with international standards and have not impeded lending, even during recent stress periods.

The Governing Council recommends concrete changes to EU banking rules, including:

• Shifting from directives to directly applicable regulations;
• Merging the five macroprudential buffers into two;
• Increasing proportionality for small banks;
• Streamlining reporting processes;
• Taking a holistic view of overall capital levels.

For media inquiries, contact Carlijn Straathof at +49 170 348 7585 or François Peyratout at +49 172 863 2119.