European Banking Sector Competitiveness Requires Completion of Banking Union and Streamlined Regulation Says AFME

European Banking Sector Competitiveness Requires Completion of Banking Union and Streamlined Regulation Says AFME

(IN BRIEF) The Association for Financial Markets in Europe has responded to the European Commission’s consultation on EU banking sector competitiveness, presenting a comprehensive set of recommendations to strengthen banks’ role in supporting economic growth and investment. AFME highlights the critical importance of completing the Banking Union, simplifying regulatory frameworks, and ensuring alignment with global standards such as Basel III to create a level playing field for European banks. The organisation also points to challenges including regulatory complexity, fragmentation, and the pressures of digital transformation, which may limit competitiveness compared to global peers. By advocating for streamlined rulemaking, improved supervisory clarity, and targeted legislative follow-through, AFME aims to ensure that EU banks can effectively finance infrastructure, innovation, and long-term economic development while maintaining financial stability.

(PRESS RELEASE) LONDON, 20-Apr-2026 — /EuropaWire/ — Association for Financial Markets in Europe has submitted its response to the European Commission’s targeted consultation on enhancing the competitiveness of the EU banking sector, outlining a series of policy recommendations aimed at strengthening banks’ ability to finance economic growth while preserving financial stability.

In its submission, AFME underscores the pivotal role banks play across the European economy, acting as key providers of credit, facilitators of capital markets activity, and suppliers of risk management solutions for corporates, investors, and public institutions. The association also highlights the mounting challenges faced by European banks and stresses their importance in mobilising capital to meet the EU’s long-term investment ambitions. A well-functioning and competitive banking sector, AFME argues, must be capable of operating efficiently at scale, ensuring the effective allocation of capital, supporting risk absorption and diversification, and maintaining market resilience throughout economic cycles.

Adam Farkas, Chief Executive Officer of AFME, emphasised the need for a robust banking ecosystem to support the EU’s broader strategic goals. He pointed to the importance of completing the Banking Union and establishing a streamlined institutional framework that allows for greater agility. He also stressed that regulatory frameworks must be modernised, simplified, and aligned with global standards to enable innovation, foster growth financing, and ensure European banks remain competitive domestically and internationally. He highlighted that the objective is not deregulation, but rather the advancement of the single market and the reduction of unnecessary complexity within the regulatory system.

Among the key priorities identified by AFME is the urgent completion of the EU Banking Union. The organisation advocates for a truly integrated single market in banking, where capital and liquidity can move freely within banking groups across member states. Addressing fragmentation and removing non-prudential barriers would facilitate consolidation, improve efficiency, and enhance competitiveness, particularly in capital markets activities that underpin both public and private investment. A completed Banking Union would also support the simplification of overlapping regulatory requirements and enable closer alignment with international standards, thereby increasing banks’ capacity to finance infrastructure, corporate activity, and technological development.

AFME also stresses the importance of maintaining a global level playing field. Ensuring consistent implementation of international frameworks such as Basel III is seen as critical to enabling EU banks to compete effectively with global peers, while taking into account Europe’s reliance on bank-based financing. Avoiding overly conservative regional deviations will be key to maintaining competitiveness.

The association calls for a thorough international benchmarking exercise to compare prudential regulatory and supervisory frameworks across major jurisdictions. Such analysis should account for structural differences in financial systems and varying approaches to risk buffers. Where significant divergences are identified, AFME recommends prompt action, including potential revisions to Level 1 legislation, alongside coordinated international efforts to uphold global standards.

Another area of concern highlighted in the response is the complexity of the EU’s internal governance framework. While acknowledging the importance of strong governance, including effective controls and risk management, AFME notes that the current system has become overly detailed and burdensome, extending across multiple regulatory levels. This complexity, it argues, can hinder competitiveness without delivering proportional benefits in terms of risk mitigation.

Digital transformation is also identified as a defining trend for the banking sector. While European banks are investing significantly in digital capabilities, structural and regulatory constraints may limit the impact of these investments relative to international competitors and large technology firms operating in financial services.

AFME further calls for a more proportionate and coherent approach to EU rulemaking and supervision. Simplifying regulatory processes, reducing duplication, and improving accountability are seen as essential steps to ensure that financial stability objectives are achieved without unnecessarily restricting banks’ ability to support economic growth. The association suggests that the Lamfalussy process should be refined to deliver more consistent outcomes and that competitiveness considerations should be embedded more explicitly within regulatory and supervisory mandates. Greater clarity around supervisory roles, including the function of the European Central Bank’s Single Supervisory Mechanism, is also recommended to enhance accountability and transparency.

Finally, AFME urges policymakers to ensure that the forthcoming competitiveness report from the European Commission is followed by concrete legislative action. Timely and targeted reforms will be necessary to strengthen the banking sector’s capacity to finance the EU economy, while maintaining financial stability and ensuring alignment with global standards.

As discussions continue, AFME has reiterated its commitment to working collaboratively with EU institutions and stakeholders to advance reforms that will enhance the resilience, efficiency, and global competitiveness of Europe’s banking sector.

Notes:

1. The Association for Financial Markets in Europe (AFME) is the voice of the leading banks in Europe’s financial markets, providing expertise across a broad range of regulatory and capital markets issues. We represent over 150 leading global and European banks and other significant market players. Our members play a vital role in Europe’s financial ecosystem, underwriting around 90% of European corporate and sovereign debt, and 85% of European listed equity capital issuances. Importantly, AFME members are market makers, providing liquidity,

which is essential for ensuring financial markets can function efficiently. We also represent law firms and other associate members which advise market participants and support AFME’s legal and regulatory initiatives. For more information please visit the AFME website: www.afme.eu

2. Follow us on X, formerly Twitter @AFME_EU

Media Contact:

Rebecca Hansford
Head of Communications & Marketing
Rebecca.hansford@afme.eu

SOURCE: AFME