Banks and the savings and investments union: from intermediation to strategic enablers

6 March 2026

By Pedro Machado, Member of the Supervisory Board of the ECB

Europe faces a critical moment. Strengthening its capacity to mobilise savings and finance investment is no longer just a financial policy objective – it has become central to its competitiveness, strategic autonomy and long-term economic growth. Achieving these goals requires advancing the savings and investments union (SIU), an indispensable reform agenda to deepen financial integration in Europe.

The European Union has no shortage of savings. What it lacks is an efficient way to transform those savings into long-term investment that drives innovation, boosts productivity and fosters resilience. Addressing this imbalance is at the heart of the SIU. The SIU is the European Commission’s strategy to improve how Europe’s financial system channels savings into productive investment. In doing so, it will enhance Europe’s competitiveness and strategic autonomy.

The SIU is not simply a continuation of the capital markets union, as some people may think. It is actually much more than that. The SIU aims to solve a broader problem: Europe’s financial architecture is still too fragmented and too skewed towards bank balance sheets, while equity and market‑based financing remain underdeveloped. At the same time, Europe faces unprecedented investment needs linked to the green and digital transitions, defence, and technological sovereignty. Addressing these challenges requires a financial system that mobilises savings more effectively, diversifies risk and operates on a truly European scale.

From a banking and supervisory perspective, the SIU is not a side project. It has the potential to reshape the financial ecosystem in which banks operate, allocate risk and support the real economy. Banks would both benefit from both a well-designed SIU and be essential to its success. It can strengthen their role in a more resilient and integrated financial system.

Savings, fragmentation and dependence

In the EU, the savings rate is high, but returns are not. A significant share of household wealth remains concentrated in bank deposits and low‑yield savings instruments, which are often held within nationally segmented markets. At the same time, many European firms – in particular innovative companies and scale-ups – face limited access to long‑term risk capital and fragmented investor bases.

This mismatch is not merely an efficiency issue. Fragmented capital markets reduce cross‑border risk sharing and increase Europe’s reliance on non‑European investors to finance strategic priorities. While Europe benefits from being an open economy, underdeveloped domestic equity markets can create self-reinforcing dynamics, as innovative firms scale up, list on stock exchanges or relocate outside the EU. This further weakens Europe’s own capital market ecosystem. In this sense, fragmentation can become a strategic vulnerability as well as a financial one.

The SIU addresses this problem directly. Its objective is to make the way the EU financial system channels savings into investment more effective, remove barriers within the Single Market and support sustainable growth in the context of new geopolitical dynamics, the climate transition and technological changes.^[1]

What the SIU changes for banks

From a banking perspective, the SIU is sometimes perceived as shifting finance away from banks and towards market-based finance. However, this interpretation is misleading. The SIU is not intended to weaken banks or replace them with capital markets. Rather, it aims to build a more balanced financial system in which bank‑based and market‑based finance support each other.

Diversification and financial stability

One of the main benefits of deeper and more integrated capital markets is risk diversification. In a predominantly credit‑based system, risks tend to accumulate on bank balance sheets, and shocks are propagated within a single sector. Capital markets allow risks to be distributed more broadly across investors and funding structures. This enhances the economy’s capacity to absorb shocks outside the banking sector.

For banks, this diversification is not a threat. It is a source of stability. A financial system in which equity, long‑term funding and market‑based instruments play a greater role reduces excessive risk concentration and supports a more resilient macro‑financial environment. This is particularly relevant in light of Europe’s long‑term investment needs, which cannot be met sustainably through bank lending alone.

More efficient use of balance sheet capacity

Banks operate under binding capital, leverage and liquidity constraints. Europe does not suffer from a shortage of bank credit, but from a structural under‑supply of equity financing. Addressing this imbalance will allow banks to use their balance sheets more efficiently, focusing on areas where relationship banking and credit expertise add the most value, while long‑term risk will be increasingly shared with market investors.

In this sense, the SIU will improve the environment in which banks operate. When appropriately designed and supervised, risk transfer mechanisms such as securitisation can free up balance sheet capacity and support additional lending to households and firms – including small and medium‑sized enterprises (SMEs).

Scale, competitiveness and new business opportunities

Fragmentation remains a defining feature of European financial markets. For banks, this translates into duplicate compliance requirements, constrained cross‑border business models and a limited ability to serve customers across Europe. By promoting integration and removing national barriers, the SIU can help make banking models more efficient and more competitive.

Deeper capital markets would also strengthen banks’ incentives to expand their capital market activities. More liquid and integrated markets would increase demand for services such as underwriting, placement, hedging and market making. Within banking groups, asset management activities would benefit from greater scale and a broader investor base, while trading activities could capitalise on increased market depth and improved price discovery.

Why the SIU needs banks

While the SIU aims to develop capital markets, it cannot succeed without banks. Banks remain the main link between households and the financial system. They play a central role in financing the European economy.

Banks as trusted intermediaries for households

Mobilising savings does not mean forcing people to move their savings or pushing households into specific products. Trust is essential: households must feel confident that they are being offered suitable products, and a real choice. Banks are uniquely positioned in this respect. They hold the bulk of household savings, cultivate long‑standing customer relationships and operate under robust conduct and consumer protection frameworks.

The SIU places strong emphasis on retail participation in capital markets, supported by financial literacy, and accessible, simple and portable investment products. Banks are the natural transmission channel for this strategy. By providing sound advice and designing and distributing suitable products, banks can help households gradually and confidently diversify their savings over the life cycle, including for retirement.

Supporting firms and SMEs

Most European companies, and particularly SMEs, will never access capital markets directly. For these firms, banks remain the primary source of external finance. The SIU does not change this reality. Instead, it aims to complement bank lending by improving risk‑sharing mechanisms and investor participation upstream of bank balance sheets.

Through securitisation, partnerships with institutional investors and an integrated banking union, banks can facilitate wider access to funding while continuing to support firms across borders. In this way, the SIU can enhance, rather than undermine, banks’ role in financing the real economy.

Integration, supervision and financial stability

The Commission and central bankers share a clear and common view: integration must not come at the expense of stability. As market‑based finance grows, risks may migrate towards non‑bank financial intermediaries, deepening the interconnections within the financial system. Addressing these dynamics requires a supervisory framework that is consistent, proportionate and capable of overseeing cross-border risks.

The SIU therefore includes a strong supervisory framework. More harmonised and, where appropriate, more centralised supervision of significant capital market players can reduce fragmentation, improve regulatory consistency and promote a level playing field. This is important for banks because differences in regulatory and supervisory frameworks can distort competition and create incentives for risk migration outside the regulated system.

An integrated banking union remains a key complement to the SIU. Progress in banking supervision has strengthened resilience and supported integration, but further steps are needed to ensure that banks can operate on a European scale. The banking union and the SIU are not alternatives. They are mutually reinforcing pillars of a modern European financial architecture.

From reform to opportunity

The SIU delivers more than just a technical reform agenda. It represents an agenda for competitiveness. It is a reform of financial intermediation that aims to preserve stability while responding to the strategic and existential challenges Europe is facing. The SIU will enable banks to diversify their risks, use their balance sheets more effectively and take advantage of additional intermediation channels in a more integrated market. More broadly, a more integrated and dynamic financial system supports sustainable growth, improves asset quality and creates better conditions for long‑term profitability.

For the SIU, banks provide a source of trust, institutional scale and operational capacity. If the right balance is found – between markets and banks, integration and supervision, and incentives and protection – the SIU will not weaken Europe’s banking model. It will modernise it, making it fit for a more competitive, more resilient and more autonomous Europe.

Ultimately, the SIU is essential to preserving prosperity and ensuring that European citizens can continue to benefit from the economic opportunities and stability we value.

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