European single market for banking: expected measures through digitalisation

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At the end of this year, the EU’s authorities are going to present additional measures in the EU-wide financial and banking sector’s measures in competitiveness, called “strengthening the single market for banking”. New measures require a kind of “cultural banking shift” towards responsible risk-taking, simplified regulatory framework, digitalisation and the expected completion of the EU banking union by 2027. The ultimate goal is to help the states, citizens and businesses with a better access to financial services at more competitive prices.  

Background
The objective of the present EU measures revealed in the Commission Communication to the member states (which is part of other main elements included in the Commission’s savings and investments union (SIU) strategy), is aimed at building a more integrated, efficient and competitive banking sector that can strengthen the EU member states’ economies.
As is known, a vital goal of the European integration process is to make the EU-wide financial system more efficient. To ensure the financial system orderly functioning and stability, the European Banking Authority, EBA is monitoring and analyzing risks and vulnerabilities relevant to the regulations for banks, investment companies and firms. EBA also facilitates information sharing among authorities and institutions through supervisory reporting and data disclosure as part of the banking union.
More on the banking union in: https://www.integrin.dk/2024/06/10/european-banks-and-financial-sector-in-need-of-additional-efficiency/

The major instruments in the efficient use of the states’ financial sectors are aimed to stimulate growth, innovation and strategic priorities, better-balanced regulatory framework, as well as creating optimal conditions for banks to take prudent risks while safeguarding the sector’s resilience. Besides, delivering better services to households and businesses – while preserving financial stability and fostering sustainable growth – would be a valuable component to “strengthening the single market for banking”, notes the Commission.
More on the banking union in: https://www.bankingsupervision.europa.eu/about/thessm/bankingunion/html/index.en.html

The European Central Bank, ECB and the national supervisors are working together on two fronts: a) secure banks’ compliance with the EU and global banking rules, and b) resolving problems on an early stage.
The EU-wide “single supervisory mechanism”, SSM was established at the end of 2013 as a first step towards expected new EU “banking union” to ensure high-quality supervision of credit institutions in the EU, to implement the EU’s policy on prudential supervision of credit institutions and to apply the single rulebook consistently. The SSM was conceived as an integrated architecture combining the ECB (as a supranational authority) and national competent authorities (NCAs) in the member states (both in the euro area and those with close cooperation agreement with the ECB).
The first SSM report was published in 2017, and the second only in April 2023; the latter mentioned that the SSM provided “good quality and proactive banking supervision, rapidly adapting to supervisory challenges”.
More on SSM in: https://www.bankingsupervision.europa.eu/about/thessm/html/index.en.html

Additional efforts
The EBA’s authorities underlined that “currently the banking sector is in good shape, i.e. in terms of capital and liquidity levels, as well as in terms of asset quality and governance”. Thus, every two years, the EBA performs stress tests of the banks for which the authority has head “unlikely but possible negative scenario” to test the banks’ performance: the latest two tests were performed in July 2023 and in 2025. The outcome of the July 2023 stress test was positive, i.e. despite adverse scenario, the banks were able to continue providing adequate credits to national economies.
The lessons learned from recent financial crises were such that: first, there were obvious weaknesses in the banks’ governance; second, there were weaknesses and delays in supervision by the authorities (in the latter, the EBA has been “enhancing activity” in the banking union during the last decade by creating the SSM with the ECB at the core of that mechanism); the third lesson was that rules were not applied in the same way across all banks world-wide: in some states (particularly in the US), weaker regulations were being applied; however in the EU, the EBA has applied the same rules to all institutions.
In the perspective, the EBA has to be “more vigilant” to avoid possible risks: i.e. geopolitical tensions represent major sources of risks in a number of different areas. For example, cyber-attacks, as well as possible fragmentation of world economic activity, could affect the “evolution of the EU’s integrated financial markets”.

Digitalization process in the banking sector
Digitalization and technological development are already heavily impacting the EU banking sector in numerous ways: e.g. cyber resilience and cybersecurity, both introducing new ways for banks to operate and manage possible risks.
Digital transformation in the banking sector represents a “full integration of digital technologies” into all areas of a business, fundamentally changing how banks operate and deliver value to customers. But EBA has to make sure that banks’ resilience remains robust with the needed digital operational security.
Another key area is innovation: new technologies are bringing new products and new financial management, which provide for new approaches for the financial sector and for regulators. Therefore, the sector shall better use the innovations, e.g. restructuring management, reinvent processes, produce new products, provide customers with better services, etc.
From the regulatory point of view, the risks shall be properly managed to avoid systemic risk or unintended negative consequences. However, regulators have to be careful and remain neutral when it comes to the introduction of technology: e.g. in making rules, the regulators are not supposed (implicitly or explicitly) favor one technology over another or one player over another; it also includes both established financial companies and the newcomers that are disrupting the industry. For example, in advanced technologies like artificial intelligence and machine learning, over 70 percent of the banks in EU were exploring the ways in which these technologies will be introduced.
More in: https://www.ibm.com/think/topics/digital-transformation-banking
Then, implementing international financial requirements, so-called Basel-III rules, is also vital: these rules have been developed in 2010s and were approved in 2019 by the EU co-legislators under the Capital Requirement Regulation, CRR and the Capital Requirement Directive, CRD. Thus, these rules have introduced the Basel-III international standards into the EU law.

The EU Banking Union
Among numerous sectoral “unions” within the European Union’s architecture there is one that affects states, businesses and citizens: it is the banking union that ensures that banks in the member states are strong and supervised in an efficient way. However, there are some differences in the EU’s banking union and the capital markets union.
The EU-wide banking union is a complex structure, which consists of numerous “building blocks”, such as e.g. supervisory mechanism, with a system for deposit guarantees and integrated crisis management framework; and a single supervisory mechanism, which has been regarded as a significant priority’s instrument. The Commission has established some measures to create a safer financial sector, which could form a single EU-wide rulebook to include the states’ financial institutions. They additionally included stronger prudential requirements for national banks, improved protection for depositors and rules for managing failing banks.
Reference: https://ec.europa.eu/info/business-economy-euro/banking-and-finance/banking-union/what-banking-union_en/

A special Commission’s website devoted to complex “banking union” issues includes the following “regulatory items”: a) single supervisory mechanism, SSM which gives the European Central Bank certain supervisory tasks over the EU and the member states’ financial systems; b) single resolution mechanism, SEM, which serves as a central EU-wide institution for bank resolution in the member states; c) European deposit insurance scheme aimed to protect retail deposits in the banking union; and d) sovereign bond-backed securities, SBBS to remove unjustified regulatory impediments to securities’ development; it was a new financial instrument (since April 2019) which assisted in reducing risk in the banking union by supporting further portfolio diversification in the banking sector.
More in: https://finance.ec.europa.eu/banking-and-banking-union/banking-union_en

Facing modern challenges
The Commission has identified three main challenges that are limiting the banking sector’s ability to support the EU economy effectively.
= First, the sector remains too fragmented along national lines. This prevents EU banks from scaling up and competing globally in key market segments and finding efficiencies across borders.
= Second, the way international banking standards, known as Basel III standards, are transposed into the EU framework does not always reflect the specific features of the EU banking landscape. The framework needs to work better for both large and small banks.
= Third, some parts of the EU regulatory framework, including the interaction between micro-prudential, macro-prudential and resolution rules, as well as reporting requirements, are too complex and burdensome and should be simplified.
Addressing these three challenges is essential to building a banking sector that is not only resilient and competitive, but also able to support the EU economy.
Source: https://ec.europa.eu/commission/presscorner/detail/en/ip_26_1637. July, 2026.

Conclusion: our opinion
The EU-wide Savings and Investments Union, SIU needs a strong and competitive banking sector; present Communication stimulates vital steps “recalibrating” the banks’ facilities in approaching risks, enabling growth and innovation while maintaining financial stability.
More on SIU in: https://www.integrin.dk/2025/11/06/eus-savings-investment-union-boosting-banks-and-insurers-equity-investments/

The SIU strategy aims to improve how the EU financial system channels savings into productive investment; it envisages an efficient and integrated banking sector based on a single rulebook and a completed Banking Union. The strategy is aligned with the EU’s Competitiveness Compass, developed in response to the recommendations of the Letta and Draghi reports; the Single Market Strategy, as well as the One Europe-One Market roadmap.
Source: https://www.integrin.dk/2026/05/24/the-european-one-europe-one-market-roadmap-commissions-assessments/

The Commission will propose in the first quarter of 2027 a package of measures to amend the banking regulatory framework and deliver on the present Communication, in line with the objectives of the “One Europe-One Market” roadmap. In parallel, the Communication calls on the EU member states, supervisory authorities and the banking industry to continue their efforts to improve banks’ competitiveness.
Reference to: https://finance.ec.europa.eu/document/download/42d48368-f401-42f2-ac8c-3ae3542f98f1_en?filename=260717-banking-sector-competitiveness-staff-working-document_en.pdf