France, Italy, and Spain have submitted a joint proposal to the European Commission calling for a new voluntary framework to simplify cross-border banking operations across the European Union. The document, seen by Euronews, argues that despite a decade of progress under the Banking Union, the bloc's banking market remains “structurally fragmented along national boundaries,” limiting the sector's ability to serve businesses and households effectively.
The proposal arrives as the Commission prepares to publish a major report on the competitiveness of the banking sector on 15 July. European Commission President Ursula von der Leyen has made competitiveness a central priority, with a legislative proposal on banking reform expected in 2027.
A Voluntary Regime for Cross-Border Groups
The three countries propose creating a new voluntary, ad-hoc regime specifically for EU banking groups with significant cross-border activities. This regime would complement existing simplification efforts aimed at ensuring regulatory consistency and reducing burden, particularly by improving the predictability and usability of capital and liquidity buffers.
The document cites an estimate from the European Central Bank that the absence of cross-border liquidity waivers constrains the transferability of around €230 billion of high-quality liquid assets within the Banking Union. This, the proposal argues, “weakens competitiveness, raises compliance costs, limits access to products and services, and undermines the scale and efficiency gains that European banks need to support strategic EU priorities.”
The push from Paris, Rome, and Madrid reflects a broader frustration among southern European member states with the slow pace of financial integration. While the Banking Union has established common supervision and resolution mechanisms, national rules still hinder the free movement of capital and liquidity across borders. This fragmentation is particularly acute for banks operating in multiple member states, which must navigate different regulatory regimes and compliance requirements.
The proposal comes at a time when the EU is also grappling with other economic challenges. For instance, the Commission recently offered limited fiscal flexibility on energy costs in response to Italy's demands, highlighting the ongoing tensions between national sovereignty and EU-wide coordination. Meanwhile, job insecurity remains a pressing issue across the continent, with Mediterranean nations leading in involuntary non-standard employment, as reported in a recent study.
The three countries argue that reducing banking fragmentation is essential for supporting the EU's strategic priorities, including the green transition, digitalisation, and economic security. By enabling banks to operate more efficiently across borders, the proposed regime could unlock capital for investment in these areas.
The European Commission is expected to consider the proposal as part of its broader review of banking competitiveness. The outcome could have significant implications for the future of the Banking Union and the single market for financial services.
