The European Commission is about to take a sledgehammer to the regulatory walls that have kept EU banks fragmented, underpowered, and perpetually jealous of their American rivals. A draft report leaked in mid-June 2026 outlines sweeping reforms designed to free up roughly €225 billion in capital and €250 billion in liquidity currently trapped by national ring-fencing rules.
What Brussels is actually proposing
The core of the reform is deceptively simple. Right now, EU banking groups have to meet capital and liquidity requirements at the subsidiary level, meaning every national unit has to hold its own reserves. The Commission wants to shift that compliance burden to the parent entity level instead.
The draft also includes provisions that would empower supervisors to mandate asset transfers between subsidiaries when they deem it necessary.
Beyond the structural overhaul, the proposals include capital relief for mortgages and loans to unrated companies, reviews of capital rules for investment firms, and a fresh look at deposit insurance schemes. The final report is expected on July 15, 2026, with actual legislative proposals slated for Q1 2027.
