The European Commission has announced plans to help EU banks compete more effectively against larger US rivals. The commission aims to limit political interference in European Union banking mergers and remove obstacles to cross-border banking within the bloc.

Current Challenges

Currently, internal barriers are preventing EU banks from expanding, leaving them at a disadvantage to US lenders that have benefited from economies of scale in a more integrated US market. EU mergers remain largely within national borders, resulting in many banking groups being large relative to their home economy but not relative to the size of the EU or international competitors.

Unjustified national interventions in cross-border bank mergers are preventing banks from acquiring scale at the EU level to reach a critical size. For example, Germany rejected an offer from Italy’s UniCredit to take over Commerzbank, citing the price offered by the Italian bank as the reason for its rejection.

Proposed Measures

The EU executive will propose a range of measures in the first quarter of 2027, including plans to crack down on EU members that breach EU rules limiting the circumstances under which they can intervene in proposed mergers. Other proposals would allow cross-border banking groups to meet capital and liquidity requirements more at the parent level, rather than the current system with additional requirements for subsidiaries.

Removing such constraints could release €230 billion of liquid assets, according to the report. The commission will also replace its proposal from a decade ago to create a European deposit insurance scheme with a new plan to simplify deposit insurance measures in the bloc.

Original reporting: Appleton, WI News Feed (HLL/CB) — read the source article.