In a speech at an Institute of International Finance roundtable, Patrick Montagner of European Central Bank Banking Supervision argued that Europe’s growth and competitiveness are constrained by fragmentation in banking and financial markets, leaving institutions below optimal scale and creating unnecessary hurdles for cross-border capital allocation. He framed the priority as deeper integration of the Single Market rather than deregulation. Montagner pointed to persistent national differences in consumer protection, tax treatment of financial products and insolvency regimes, using mortgages and non-performing loan recoveries as examples of how divergent legal requirements and enforcement practices complicate risk management and provisioning across borders. He called for removing key barriers to intra-group capital and liquidity flows, including reconsidering requirements that “trap” resources at subsidiary level, and for banks to consider converting subsidiaries into branches where relevant, with the ECB and national supervisors building the trust needed for cross-border operations. He also highlighted the need to further develop the bank crisis management framework and close gaps in the resolution framework, including through reform of the crisis management and deposit insurance framework and the establishment of a European deposit insurance scheme to provide equal depositor protection across the banking union. Beyond banking, he described digital finance and the digital euro as potential enablers of cross-border integration and argued for a more European approach to supervising non-bank financial intermediation and fragmented capital markets to address cross-border risks and support investment.

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