Europe’s banks have a scale problem, and Brussels just admitted it out loud. The European Commission published a strategic report on July 17 outlining a set of proposals designed to help EU banks compete with their American counterparts, which have spent the better part of a decade pulling away in profitability, market share, and capital markets dominance.
The centerpiece: a regulatory overhaul that could free up roughly €230 billion in liquid assets currently trapped by fragmented national rules. EU banks are sitting on capital they can’t actually use because each country has its own set of requirements for how capital gets locked up.
What Brussels is actually proposing
The report targets three structural problems that have kept European banks smaller and less competitive than their US peers. First, regulatory fragmentation across member states. Second, national political interference in cross-border bank mergers. Third, overlapping capital and liquidity requirements that treat each subsidiary like it’s its own island.
The most consequential proposal would allow banks to manage compliance at the parent-company level rather than duplicating it across every national subsidiary.
