The European Central Bank (ECB) on Tuesday published proposals aimed at making banks and the financial infrastructure in which they operate better able to support the economy.

The proposals, endorsed by all euro area central banks, form part of the ECB Governing Council’s response to the European Commission’s consultation on the competitiveness of the EU banking sector.

They build on earlier recommendations issued in December 2025 on simplifying EU banking rules, which together form a comprehensive policy response.

The ECB stressed that resilient banks are essential for long-term growth and competitiveness in the euro area, particularly in an environment marked by uncertainty.

It argued that competitiveness should be driven by harmonisation, integration and scale rather than deregulation, warning that unnecessary complexity and cross-country fragmentation are holding the sector back.

To address these challenges, the ECB called for the euro area to operate more like a single jurisdiction in financial regulation, reducing barriers that limit efficiency and growth.

The Governing Council urged synchronised progress on key elements of the banking union, including concrete steps towards establishing a European deposit insurance scheme, accompanied by a clear implementation timetable.

It also emphasised that capital and liquidity should move freely within cross-border banking groups, allowing institutions to operate more efficiently across the euro area.

At the same time, policymakers were encouraged to advance the savings and investments union to support deeper capital markets and broader financial integration.

“Euro area central banks are united the crucial step to strengthen Europe’s competitiveness is a truly single banking market where capital and liquidity can move across borders and all deposits are protected equally,” said Luis de Guindos, Vice-President of the ECB.

“The Eurosystem is firmly committed to addressing undue complexity in the EU,” he added.

“Better integrated markets and more cross-border competition can allow banks to better reap economies of scale and diversify their activities,” said Claudia Buch, Chair of the ECB’s Supervisory Board.

“This together with guardrails that safeguard financial stability can strengthen banks’ business models and their resilience,” she continued.

The ECB underlined that efforts to simplify regulation must focus on reducing complexity without undermining financial stability.

It pointed out that reforms introduced after the global financial crisis were instrumental in restoring confidence, making banks more resilient while preserving their ability to finance the economy.

Safeguards such as the output floor and the prudential treatment of non-performing loans were described as essential tools that should remain in place.

The ECB also noted that capital requirements for euro area banks are broadly aligned with international standards, and that there is no evidence they have constrained lending or efficiency.

It highlighted that banks have continued to provide credit even during recent periods of acute stress, reinforcing the resilience of the sector.

Among the proposed changes, the Governing Council called for a shift from directives to directly applicable regulations, aiming to improve consistency across member states.

It also proposed consolidating the current macroprudential framework, enhancing proportionality for smaller banks, streamlining reporting obligations and taking a more holistic approach to capital requirements.

The ECB concluded that these measures would help reduce fragmentation, strengthen resilience and support a more competitive and integrated banking system across the euro area.