EU Proposes Easing Barriers for Banks’ Cross-Border Capital Flows and Reforms
Overview of the European Commission’s Draft Report on Banking Competitiveness
June 18 (Reuters) - The European Union is set to remove barriers preventing banks from moving funds across the bloc, the Financial Times reported on Thursday, citing a draft European Commission report.
Key Proposals to Boost EU Banking Performance
• The proposals in the draft report on EU banking competitiveness are aimed at boosting performance of EU lenders compared to their U.S. rivals and also outline possible capital relief on mortgages and loans to unrated companies, the FT said.
Capital Relief and Lending Reforms
• It also proposes plans to reform the structure of bank deposit insurance schemes and to review capital requirements for investment firms, the report added.
Verification and Response
• Reuters could not immediately verify the report. The European Commission did not immediately respond to a request for comment.
Current Regulatory Challenges and Investment Gap
• Europe's banks have said the current regulatory framework is constraining lending, with the European Banking Federation estimating the bloc faces a widening €1.4 trillion ($1.62 trillion) annual investment gap that risks holding back its economic objectives.
Cross-Border Flexibility and Market Integration
• According to the FT, the proposal would give banking groups greater flexibility to allocate resources across borders, tackling concerns that national requirements force lenders to hold excess capital and liquidity in local subsidiaries.
• The report also comes a day after Europe's antitrust chief Teresa Ribera urged EU countries to back cross-border bank mergers to help complete the single market.
Next Steps and Timeline
• The European Commission assessment of banking sector competitiveness is expected in July, with legislative proposals likely to follow in 2027.
Reporting Credits
(Reporting by Ananya Palyekar in Bengaluru, Editing by Franklin Paul and Himani Sarkar)
