EU Commission draft plan to remove barriers for banks cross-border capital flows
Europe's banks may soon shift capital freely across the EU. A draft European Commission report seeks to remove rules locking funds inside national subsidiaries, to help EU lenders compete with US rivals. Reuters reports the assessment lands in July, legislation likely 2027.
Europe's banks may soon be able to move capital freely across the bloc. According to a draft European Commission report cited by Reuters and the Financial Times, Brussels wants to remove rules that currently lock funds and liquidity inside national subsidiaries. The plan would let large banking groups manage capital at the parent-company level, with national supervisors gaining powers to ensure requirements are met across borders rather than ring-fenced in each member state. Parent companies would also face a legal obligation to transfer resources to subsidiaries when needed, a change the European Central Bank has pushed for over many years. The stated aim is to strengthen the competitiveness of EU lenders against larger US rivals. The draft also outlines possible capital relief on mortgages and loans to unrated companies, a reform of deposit insurance scheme structures, and a review of capital requirements for investment firms. The backdrop is a financing shortfall: the European Banking Federation estimates the EU faces a widening annual investment gap of around 1.4 trillion euros. The Commission's assessment of banking sector competitiveness is expected in July, with legislative proposals likely to follow in 2027. The proposals would affect banks, supervisors and corporate borrowers across the EU, including in Germany, where institutions have long argued the current framework constrains lending.