European Central Bank Banking Supervision has published the Eurosystem’s response to the European Commission’s consultation on the competitiveness of the EU banking sector. The response argues that stronger competitiveness should come from a more integrated Banking Union, a less complex prudential framework and the preservation of bank resilience, rather than from weaker safeguards. In this context, it presents competitiveness as a function of banks’ efficiency, capital strength and sustainable business models, supported by sound governance and risk management. The response calls for treating the Banking Union as a single jurisdiction for financial regulation, including a shift from directives to directly applicable regulations, harmonisation of areas such as insolvency and mortgage law, progress on Capital Markets Union, and freer movement of capital and liquidity within cross-border groups with safeguards. It also backs completing Banking Union through a European Deposit Insurance Scheme, a framework for liquidity in resolution, and ratification of the revised Treaty Establishing the European Stability Mechanism to provide a backstop to the Single Resolution Fund. On simplification, the Eurosystem proposes reducing the number of capital stack elements, creating a dedicated simpler regime for smaller banks, aligning MREL and TLAC more closely, simplifying the EU stress test, and streamlining supervisory reporting and data requests. The response maintains that post-crisis reforms have strengthened resilience, citing an increase in euro area banks’ Common Equity Tier 1 ratio from 12.7% in 2015 to 16.1% in 2025 and a leverage ratio of 6%. The European Commission closed its consultation in April 2026 and plans to deliver its report on the EU banking sector in 2026, bringing forward work linked to the Capital Requirements Regulation review timetable that otherwise runs to 2028. Separately, ECB Banking Supervision notes that its own supervisory reform initiatives are being implemented through 2026 and subsequent years.
European Central Bank - Banking Supervision 2026-05-06
European Central Bank Banking Supervision sets out Eurosystem response on EU bank competitiveness centred on Banking Union integration and prudential simplification
The European Central Bank Banking Supervision has published the Eurosystem’s response to the European Commission’s consultation on EU banking sector competitiveness, arguing that competitiveness should be driven by a more integrated Banking Union, a simpler prudential framework and preserved resilience. The response calls for treating the Banking Union as a single jurisdiction, completing it through measures such as a European Deposit Insurance Scheme and a backstop to the Single Resolution Fund, and simplifying capital, MREL/TLAC, stress testing and reporting.