Freeing Capital and Curbing Political Interference
The report, which sets the stage for legislative proposals in the first quarter of 2027, targets what the Commission views as the fragmentation holding back Europe’s banking sector. Among the most consequential measures, the Commission plans to allow cross-border banking groups to meet capital and liquidity requirements at the parent level rather than duplicating them at individual subsidiaries, as currently required under EU rules. According to Reuters, removing such constraints could release approximately €230 billion ($263.1 billion) in liquid assets. Wwtvbam
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The Commission also signaled it would crack down on member states that breach EU rules by intervening politically in proposed banking mergers. Cross-border bank acquisitions in Europe currently take an average of 285 days, making EU banking M&A among the slowest in the world, according to a report by the Association for Financial Markets in Europe. Rreuters
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Replacing EDIS and Simplifying Rules
In a move that acknowledges years of political deadlock, the Commission said it would withdraw its original proposal for a European Deposit Insurance Scheme, or EDIS — a cornerstone of the unfinished Banking Union first proposed roughly a decade ago — and replace it with a new, simplified approach to harmonizing deposit insurance across the bloc. The EU adopted its Crisis Management and Deposit Insurance framework in March 2026, but a fully mutualized deposit guarantee system has remained politically unachievable. Bbham
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The report also calls for simplifying what it describes as “unduly complex and burdensome” supervisory requirements, part of a broader effort to make EU banks more competitive globally. The Banking Policy Forum Ireland welcomed the proposals, highlighting measures to address national gold-plating of EU rules and to reassess remuneration regulations. Eeuronews
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Road Ahead
The Commission’s report follows a targeted consultation launched in February 2026 and months of industry lobbying for regulatory relief. Concrete legislative changes are expected by the end of March 2027, subject to negotiations with the European Parliament and member states. The reform effort comes as Europe faces what Reuters described in June as an annual investment gap of €1.4 trillion, underscoring the urgency Brussels attaches to unlocking bank lending capacity. Rregulationtomorrow
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