Europe’s banking union has come very far. It should go further.

6 November 2026

By Claudia Buch, Chair of the Supervisory Board of the ECB, and Dominique Laboureix, Chair of the Single Resolution Board

Since the great financial crisis, Europe has made major strides in strengthening the banking sector. Banks are more resilient, supervision and resolution have been brought to the European level and the Single Rulebook consistently applies common prudential standards for banks across countries.

Yet banking markets remain fragmented along national lines. Many rules relevant for the provision of banking services differ across countries. This makes it harder for businesses and households to benefit from the cross-border provision of services, constrains cross-border diversification of risks and limits banks’ ability to develop business models that require scale. This fragmentation has significant economic costs.^[1] Moreover, parts of the regulatory framework have become unnecessarily complex.

The European Commission’s recent communication on banking competitiveness puts forward an agenda to promote greater integration while simplifying the regulatory framework.^[2]

We strongly support efforts to reduce unnecessary complexity while safeguarding resilience. Within the European Central Bank and the Single Resolution Board, we are already working within our respective mandates to make the framework more efficient and effective.^[3]

Close cooperation between our two institutions is delivering concrete benefits. Data requests and the planning of on-site inspections are closely coordinated; weekly liquidity data are collected through a single platform. Processing times for applications for reductions of own funds and MREL early redemption requests have been significantly shortened while maintaining strong prudential safeguards.

There are some principles that the legislator should keep in mind when simplifying the regulatory framework.

Simplification cannot come at the expense of resilience. The framework has been built on the experience of past crises, and that experience still matters. Weakening resilience would undermine the banking sector’s ability to buffer future shocks, with adverse consequences for the economy.

Simplification should not mean moving away from internationally agreed standards. Europe benefits from having a regulatory framework that is consistent with the global framework. This consistency helps maintain market confidence in European banks. It facilitates cooperation with supervisory and resolution authorities in other jurisdictions.

Finally, simpler rules should not blur institutional responsibilities. Supervisors and macroprudential and resolution authorities have complementary but distinct mandates. Clear responsibilities help avoid overlaps and gaps, ensure clear accountability and enable authorities to act effectively and promptly, particularly in times of crisis.

The Commission’s agenda for deeper banking integration could be transformative. Building on the progress already made, a comprehensive reform package could help overcome the remaining barriers to a genuinely European banking market, unlocking significant benefits in terms of integration and growth. Three measures would be particularly important to realise this potential.

First, establishing a common European framework for deposit insurance as the still missing third pillar of the banking union. Although deposit protection is harmonised across the banking union, deposit guarantee schemes remain national. In a severe crisis, confidence in deposit protection can therefore still depend on the financial strength of the national banking system and, ultimately, the sovereign. A common European framework would alleviate this link. We therefore welcome the Commission’s efforts to find a way forward on European deposit insurance. A common framework would strengthen confidence that depositors are equally protected wherever their bank is located, reducing incentives to restrict the allocation of capital and liquidity across national borders.

Second, enabling the better flow of capital and liquidity within banking groups. Allowing banks to allocate resources more freely within their groups would improve efficiency in normal times and help them to buffer adverse shocks in a more flexible way. Currently, banks can apply for capital and liquidity waivers within a single country, subject to prudential safeguards. Across borders, only liquidity waivers are possible, and these are rarely used. This reflects concerns that resources transferred from a subsidiary to its parent might not be available to support the subsidiary in a crisis. Such concerns must be addressed to ensure that borders within the banking union do not become an obstacle to the stability and soundness of banks and to allow the smooth circulation of funds.

To ensure that resources will be available where they are needed, including in times of stress, safeguards should be strengthened. The existing framework provides an important foundation. Already now, recovery and resolution plans are required – and are an example of good practice – to help banks and authorities prepare for financial distress, while supervisors have powers to intervene at an early stage.^[4] Within the banking union, the relevant national authorities are involved in supervisory and resolution decision-making at European level, ensuring that all perspectives are taken into account. Building on these protections, we support developing a stronger legal framework of supervisory, prudential and resolution safeguards, including credible intragroup support arrangements, to provide greater certainty that capital and liquidity can be mobilised when needed. Naturally, such safeguards should not impinge on authorities’ ability to act flexibly in a crisis.

Third, strengthening the framework for liquidity in resolution. Even after a bank has been recapitalised through resolution, it may face substantial liquidity outflows or difficulties accessing market funding. For the largest cross-border banking groups, there might be circumstances in which these needs may exceed the resources available through existing European resolution arrangements. Credible arrangements to provide liquidity during and immediately after resolution would give authorities and markets greater confidence that a viable bank can continue operating and performing its critical functions. This would strengthen the credibility of the resolution framework.

The ECB and the SRB closely cooperate and thereby sustain trust in the banking union. Much of that work happens in normal times, long before a crisis emerges. A deeper and more complete banking union would give that trust a stronger institutional foundation. European-wide deposit insurance, intragroup arrangements with adequate safeguards, and a credible backstop for liquidity in resolution would strengthen confidence in the ability to manage crises at the European level, reducing incentives to restrict the cross-border use of capital and liquidity out of concern for the stability of national banking systems.

That is why the Commission’s agenda on simplification and integration should be taken forward as a package. Simplification can make the regulatory framework more efficient and effective, but it is greater integration that can unlock substantial economic benefits. Pursuing simplification while postponing integration would leave much of the potential of this reform agenda unrealised. Above all, resilience needs to be preserved: weakening standards would only compound the costs of continued fragmentation. By advancing both simplification and integration together, we can make European banking more competitive and resilient – in good times and, crucially, in bad times.

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