Brussels Plans Banking Reform to Compete with US

The European Union is preparing to remove barriers preventing banks from moving funds across the bloc, the Financial Times reported on Thursday, citing a draft European Commission report.

The proposals, set out in a report on the competitiveness of EU banks, are aimed at improving their performance relative to US rivals. They also outline possible capital relief for mortgages and loans to unrated companies.

The draft further proposes reforming the structure of bank deposit insurance schemes and reviewing capital requirements for investment firms.

Reuters could not immediately verify the report. The European Commission did not respond to a request for comment.

According to the Financial Times, the measures would give banking groups greater flexibility to allocate resources across borders. They are intended to address concerns that national requirements force lenders to hold excess capital and liquidity in local subsidiaries.

European banks have said that the current regulatory framework constrains lending. The European Banking Federation estimates that the bloc faces a widening annual investment gap of €1.4tn ($1.62tn), which risks holding back its economic objectives.

The report comes a day after European antitrust chief Teresa Ribera urged EU countries to support cross-border bank mergers to help complete the single market.

The European Commission’s final assessment of the banking sector’s competitiveness is expected in July, with legislative proposals likely to follow in 2027.

(Reuters, Max)