ECB Proposes Banking Union Reforms to Enhance EU Bank Competitiveness

April 20, 2026

Eurosystem's response to EC consultation on the competitiveness of the EU banking sector

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The European Central Bank (ECB) has published its Governing Council's response to the European Commission's targeted consultation on the competitiveness of the EU banking sector. The response builds on the ECB's High-Level Task Force (HLTF) simplification proposals, endorsed by the ECB in December 2025. The response and proposals are endorsed by all euro area central banks.

The ECB supports an ambitious reform agenda to enhance the competitiveness of EU banks while preserving financial resilience. It emphasises that competitiveness should be driven by greater harmonisation, integration, and scale rather than deregulation. It considers that while post crisis prudential reforms have strengthened resilience without restricting banks' capacity to finance the economy, fragmentation of EU banking markets continues to constrain banks' ability to scale and compete globally.

To address this, the proposals include:

• Treating the banking union as a single European jurisdiction for the purpose of financial regulation.
• Allowing capital and liquidity to flow freely within cross border banking groups in the banking union (subject to safeguards for credit institutions and their subsidiaries, branches and consolidated groups).
• Finalising the European Deposit Insurance Scheme (EDIS) with a clear implementation timetable.
• Making the ECB Governing Council responsible for taking a holistic view of the overall level of capital demand within and across the banking union.
• Further harmonising the prudential regulatory framework and reducing non-prudential barriers starting with merging the Capital Requirements Directive into the Capital Requirements Regulation, to reduce regulatory divergences arising from national implementation.
• Simplifying the macroprudential framework by merging the existing five macroprudential buffers into two: (i) a non-releasable buffer (merging the current capital conservation buffer and the buffers for global and other systemically important institutions); and (ii) a releasable buffer (merging the current countercyclical capital buffer and systemic risk buffer).
• Aligning the minimum requirement for own funds and eligible liabilities (MREL) and total loss-absorbing capacity (TLAC) frameworks more closely (without reducing gone-concern resources).
• Expanding the degree of proportionality under the existing regime for small and non-complex institutions and increasing consistency in the application of the proportionality principle in supervision.
• Streamlining the EU banking reporting framework, including by implementing the HLTF's six reporting focused simplification recommendations, while maintaining the "supervisory need to know" principle.
• Adjusting the prudential framework to close regulatory gaps between banks and non-banks to preserve the level playing field and reduce disintermediation risks, while supporting innovation. [View source.]

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2026

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