On the competitiveness of the banking sector in the European Union

–having regard to Enrico Letta’s report of 10 April 2024 entitled ‘Much more than a market – speed, security, solidarity: empowering the Single Market to deliver a sustainable future and prosperity for all EU Citizens’,

–having regard to Mario Draghi’s report of 9 September 2024 entitled ‘The future of European competitiveness’,

–having regard to the European Council conclusions of 23 October 2025 on competitiveness and twin transition,

–having regard to the Economic and Financial Affairs Council conclusions of 12 December 2025 on simplifying the Union’s financial services regulation,

–having regard to Rule 55 of its Rules of Procedure,

–having regard to the report of the Committee on Economic and Monetary Affairs (A10-0xxx/2026),

A.whereas fragmentation of the EU banking sector, persistent national barriers, excessive regulatory complexity and a lack of market-driven cross-border consolidation undermine the sector’s global competitiveness and widen the profitability gap between EU and US banks;

B.whereas completion of the Banking Union and the achievement of the Savings and Investment Union will strengthen competition, facilitate the free and efficient allocation of private capital and reduce that fragmentation;

C.whereas a competitive banking system depends on a supervisory architecture that is clear, coherent and free of unnecessary duplication; whereas a review is needed to recalibrate supervisory competences between the national and European levels; whereas common European regulatory and supervisory authorities should, without prejudice to financial stability, consider the impact of their decisions on competition, economic growth and international competitiveness;

D.whereas the standards emerging from the Basel Committee for Banking Supervision are at the heart of the EU’s prudential regime;

E.whereas the EU has taken an ambitious approach to the implementation of the Basel III finalisation package, both in scope and timeline, while an uneven implementation timetable is emerging internationally;

F.whereas technological progress is reshaping financial services, and the EU’s banks must be able to harness this transformation;

G.whereas small and medium-size enterprises (SMEs) are the backbone of the EU economy, and rely heavily on bank financing; whereas it is therefore crucial that regulatory capital rules support, rather than hinder, the ability of banks to lend to them;

H.whereas a stable and predictable regulatory framework is essential for long-term planning, private investment and the efficient operation of banks; whereas legislative initiatives should be based on clear evidence and impact assessments;

General considerations

1.Welcomes the Commission communication entitled ‘Competitiveness of the Banking Sector and the Single Market in Banking’, and shares its analysis; encourages the Commission and the co-legislators to have the necessary political ambition to develop necessary legislative measures, especially those needed to complete the Banking Union;

2.Stresses the need to remove unjustified barriers to the single market, simplify regulation, foster competition, facilitate market-led cross-border consolidation and ensure that public support measures do not undermine fair competition or create an uneven playing field;

3.Believes that the development of a better integrated European banking market would represent a major step in reducing market fragmentation; recalls that the Banking Union, based on the three pillars of supervision, resolution and deposit insurance, should be further developed with a clear timeline and measurable milestones;

4.Welcomes the Commission proposal to use the enforcement toolkit in cases of breaches of EU law, in particular with regard to mergers and acquisitions, which should reduce national interference in cross-border deals;

5.Stresses that bank consolidation and mergers should be driven by market considerations and assessed under clear, predictable and consistently applied prudential and competition rules; warns that unjustified government interventions, particularly where they are not supported by robust economic evidence or a demonstrated overriding public interest, may deter investment, preserve inefficient market structures, fragment the single market and hinder the emergence of stronger and more competitive European banking groups;

6.Stresses that a competitive, profitable and well-capitalised banking sector is indispensable for mobilising the private financing needed to support the EU’s economic growth; underlines that banking and capital-market reforms should therefore be pursued as mutually reinforcing elements;

7.Welcomes the Commission’s intention to address the risk of excessive concentration of sovereign exposures by encouraging the diversification of the sovereign bond portfolios of banks;

Competitiveness and capital requirements

8.Considers that, in order to support the EU’s broader growth agenda, the mandates of the European Supervisory Authorities should be broadened to include an explicit competitiveness and innovation dimension; believes that aligning their objectives with growth and competitiveness considerations as a formal secondary objective, without prejudice to financial stability as their primary objective, would strengthen their ability to safeguard stability while promoting a regulatory environment that supports investment, innovation and economic growth across the EU;

9.Considers that genuine simplification of the capital stack is needed; stresses that the objective should be to reduce the number of overlapping buffers and supervisory add-ons, creating a more transparent hierarchy of capital requirements, including with regard to the differentiation of going concerns and gone concerns;

10.Believes that European banking rules and supervisory practices must be calibrated to the size, business model, complexity, organisational structure and risk profile of each banking institution; stresses that the principle of proportionality should apply to all banks, including large and internationally active banking groups, and should ensure that prudential and supervisory requirements reflect their actual risks, geographical diversification and group structures, without giving rise to unjustified duplication or disproportionate burdens;

11.Recalls that, unlike other major jurisdictions, including the United States, the United Kingdom and Switzerland, the EU applies the full Basel framework to virtually all banks, irrespective of their risk profile or cross-border activities, thereby going beyond its intended application to internationally active banks and creating a structural competitiveness gap for smaller European banks; considers, therefore, that the upcoming review of Regulation (EU) No 575/2013 should explore an optional and significantly simpler regime for small, non-systemic banks that do not operate across borders, separate from but coexisting with the current European banking rules;

12.Welcomes the Commission’s intention to ensure similar regulatory treatment of intragroup exposures in domestic and cross-border situations, where risks are effectively managed and supervised on a consolidated basis;

13.Believes that aspects of the new Basel III framework could unintentionally make credit less accessible to SMEs;

14.Believes that the SME supporting factor, which allows banks to hold less capital against loans to smaller firms, has been an effective tool and should be enhanced; believes, furthermore, that there is a strong case to raise the threshold for qualifying SME exposures to reflect the updated definition of small mid-cap companies in the EU;

Simplification

15.Calls for an omnibus legislative initiative to identify and remove obsolete, excessively burdensome or overlapping provisions, focusing on eliminating duplication and avoiding multiple data requests to European banks for the same information;

16.Believes that more efficient supervision must go hand in hand with addressing gold-plating, where national rules or supervisory expectations exceed EU requirements without clear justification; stresses that the European Supervisory Authorities should be empowered to challenge disproportionate national add-ons more effectively;

17.Believes that simplification must extend to supervisory processes and that national authorities should intensify efforts to streamline and harmonise the supervisory review and evaluation process, thereby avoiding duplicative data requests, inconsistent timelines and limited transparency around risk assessments;

Digital framework

18.Considers that banks should be encouraged to deploy AI in areas such as creditworthiness assessments, fraud prevention and risk management, where it can reduce information asymmetries and enhance resilience, and that innovative use cases can be tested without being prematurely categorised as high-risk under horizontal AI rules; stresses that EU regulation must not become an obstacle to the adoption of technology;

19.Calls on the Commission to clarify the interaction between the Artificial Intelligence Act and sectoral financial services legislation, particularly regarding internal governance and quality management processes;

20.Believes that the tokenisation of money and assets has the potential to deliver real-time settlement, lower transaction costs, increase liquidity and develop new business models, offering banks meaningful efficiency gains; believes that by shaping the regulatory framework for digital assets correctly, the EU can preserve its role in global finance and avoid dependence on non-European providers;

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21.Instructs its President to forward this resolution to the Council and the Commission.