One market, one rulebook: integration is Europe’s best simplification strategy

Contribution by Sharon Donnery, Member of the Supervisory Board of the ECB, for the Eurofi Magazine

Dublin, 16 September 2026

The debate on simplification and competitiveness starts from a position of strength: Europe’s banks are better capitalised, more liquid and more profitable than in the past. What many still lack, however, is scale. A bank seeking to serve customers from Rome to Riga must still navigate national variations in what is intended to be a single European rulebook.

Capital and liquidity cannot yet move freely across borders within banking groups, and directives are still transposed differently across Member States. The European Commission’s report on the competitiveness of the European banking sector points to the same conclusion: fragmentation prevents Europe’s banks from reaching the scale of their global peers. We share this diagnosis: Europe’s complexity problem is, at its root, a fragmentation problem. The single greatest simplification measure available to Europe is therefore integration itself. And this matters all the more in an environment of heightened geopolitical, cyber and operational risk, where complexity may draw resources away from good governance and risk management.

Important parts of the regulatory framework – including governance, licensing and fit and proper assessments – still take the form of directives that are transposed nationally and sometimes supplemented in different ways. National and regulatory constraints keep capital and liquidity within subsidiaries of cross-border groups rather than allowing them to be managed more efficiently at group level. Around 80% of banks’ loan portfolios are still national, with cross-border deposits accounting for only 2%. Together, these barriers force banks to operate parallel structures, duplicate processes and navigate a patchwork of local rules. Some of these arrangements may reflect prudential concerns, but taken together they add complexity and limit the benefits of a more integrated banking market.

Simplification through integration would have benefits well beyond large cross-border banking groups. For example, extending the small and non-complex institutions regime would embed proportionality more firmly within the single rulebook.

Three integration measures would deliver the greatest simplification gains.

First, the single rulebook should become truly single. A structured review of options and discretions, together with a shift from directives to directly applicable regulations wherever divergence serves no prudential purpose, would reduce complexity at its legal source. A simpler framework is one that is applied consistently across Member States.

Second, the banking union should be treated as a single jurisdiction. Cross-border capital and liquidity waivers within groups, and the lifting of ring-fencing measures, would allow banks to manage their resources on a European scale. This requires trust, and trust requires the architecture to be completed: a European deposit insurance scheme with a clear implementation timetable and a European framework for liquidity in resolution. Depositors should be able to rely on the same level of protection across the banking union.

Third, banks should be able to report the same information once, instead of reporting similar data several times to different authorities. A more integrated European reporting framework, shared by statistical, prudential and resolution authorities, would reduce overlap and duplication and make reporting more efficient. That would save time and resources for banks and improve the consistency of the information authorities receive.

Supervisors should apply the same discipline they ask of others. ECB Banking Supervision is therefore also simplifying. In practice, this means simpler procedures, more delegated decisions, more streamlined reporting, more targeted inspections and clearer supervisory guidance. The result is supervision that is more risk-focused, faster and easier for banks to navigate.

Rules for the single market should, wherever possible, be written once at European level, as regulations. But simplification must not stop in Brussels or Frankfurt. Complexity should not reappear through national add-ons, parallel requirements or unnecessary internal complexity within firms. In this context, banks also have a role to play by simplifying their structures, rationalising their use of internal models and improving the quality of their data.

The bar stays where it is: simpler requirements, not lower requirements. Resilience is what enabled European banks to continue financing households and firms through a pandemic, an energy crisis and a trade shock. But resilience trapped in national silos cannot fund the investment Europe now needs. Fragmentation is both a complexity problem and a competitiveness problem, and the answer to both is the same: more Europe, not less.