The European Central Bank (ECB) has released a set of proposals intended to improve banks’ capacity, and that of the wider financial system around them, to support the economy.
All central banks across the euro area have backed the package.
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It represents the ECB Governing Council’s submission to the European Commission’s consultation on the “competitiveness of the EU banking sector”.
The ECB said the response builds on the Governing Council’s December 2025 proposals on simplifying EU banking legislation and should be considered alongside them.
In its response, the Governing Council said “resilient banks are a prerequisite for the euro area’s long-term growth and competitiveness”, particularly amid current uncertainty.
It said competitiveness should come through “harmonisation”, integration and scale rather than “deregulation”, and argued that “unnecessary complexity and cross-country fragmentation” are acting as obstacles.
The Governing Council said the euro area needs to operate more like a single jurisdiction in financial regulation.
It called for coordinated movement on the main elements of the banking union, including practical steps towards a European Deposit Insurance Scheme, with a defined timetable for implementation.
It also said capital and liquidity should move freely within cross-border banking groups in the euro area.
The Governing Council further called on policymakers to deepen capital markets by moving ahead with the savings and investments union.
On regulatory reform, the ECB said efforts to simplify the framework should reduce unnecessary complexity without undermining resilience.
It said the changes introduced after the global financial crisis helped rebuild confidence in euro area lenders and strengthened them without limiting their ability to finance the economy.
The Governing Council said safeguards such as the output floor and the prudential treatment of non-performing loans remain important for covering risks properly and should stay in place.
The ECB added capital requirements for euro area banks are broadly in line with those in other jurisdictions and with international standards.
Among the changes proposed by the Governing Council are replacing directives with directly applicable regulations for banking rules, combining the current five macroprudential buffers into two, applying greater proportionality for smaller banks, reducing reporting burdens, and assigning the Governing Council responsibility for taking a holistic view of overall capital levels.
ECB vice president Luis de Guindos said: “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.
“The Eurosystem is firmly committed to addressing undue complexity in the EU.”
