From political momentum to action: building a more competitive European banking system

In her State of the Union address on 16 September, President Ursula von der Leyen highlighted the need for a European banking system that supports not only stability, but also growth. She announced a new banking package focused on simplification and reducing fragmentation, while stressing the need for greater capacity and appetite for risk.

For the ABBL, this is an important political signal. It also comes at a particularly timely moment: on 17 September, the ABBL submitted its feedback to the European Commission consultation on the competitiveness of the EU banking sector, setting out concrete priorities to strengthen the sector and further integrate the Single Market while safeguarding financial stability and resilience.

Reconciling financial stability and growth

A strong Europe needs a financial system that is both stable and competitive. These two objectives should not be seen as opposing forces. The challenge is to reconcile them more effectively.

European banks are today strong and well capitalised. But they must also be able to play their full role in financing the considerable investments Europe needs, whether in infrastructure, innovation, digitalisation, energy or defence.

Simplification does not mean deregulation. It means ensuring that regulation is more coherent, proportionate and better based on risk.

Turning political momentum into concrete action

The ABBL’s response to the European Commission consultation translates these principles into concrete proposals.

It identifies seven priorities for strengthening the competitiveness of the EU banking sector and further integrating the Single Market:

1. Review the capital requirements framework to reduce unnecessary complexity, overlapping prudential requirements and excessive gold-plating, while restoring greater risk sensitivity.
2. Apply genuine risk-based proportionality, ensuring that regulatory and supervisory requirements reflect institutions’ actual risk profiles, complexity and business models rather than relying primarily on balance-sheet size.
3. Reduce fragmentation within the Single Market by addressing remaining barriers to cross-border banking, national gold-plating and supervisory divergences, while promoting common standards.
4. Significantly reduce regulatory duplication through a genuine “report once” approach, more harmonised data standards and better information-sharing between authorities.
5. Preserve the diversity and openness of Europe’s banking ecosystem, ensuring that reforms work for different banking models and that the EU remains attractive to international banking groups and highly skilled talent.
6. Promote innovation as a driver of competitiveness through simpler and better aligned digital regulation, technology-neutral and risk-based approaches, and greater use of regulatory sandboxes and public-private experimentation.
7. Embed competitiveness and operational feasibility into regulatory design, taking greater account of the cumulative impact of requirements, legal certainty, regulatory stability and realistic implementation timelines.

Creating the capacity to take risk

An economy that wants to invest, innovate and transform cannot operate according to a zero-risk logic.

Financial stability remains fundamental, but the regulatory and prudential framework must allow for controlled and proportionate risk-taking. This is also why the ABBL calls for greater risk sensitivity and genuine proportionality in the European framework.

Banks will, of course, not be able to meet Europe’s financing challenge on their own. Europe also needs deeper capital markets, better mobilisation of European savings and a genuine single market for financing.

But, as President von der Leyen pointed out, these transformations take time, while the financing needs of European companies are immediate.