EU says bigger banks are needed to compete with US lenders

The European Union said on Friday that it needs larger banks if the 27-nation bloc wants to catch up with competitors in the United States.

The EU published a report on the banking sector as part of efforts to strengthen the European economy by unlocking more money for different industries. Brussels said it wanted to ease rules for European banks, including by lowering capital requirements.

After the 2007-2008 financial crisis, the Basel Committee, an international banking supervisory authority, set new global standards intended to support banking system stability. European banks have long criticised what they describe as the EU's overzealous application of those rules. They say the rules, combined with national regulations, put them at a disadvantage against foreign banks and limit their ability to finance the European economy.

US regulators also proposed loosening some capital rules earlier this year.

A senior European official said the EU did not want to weaken the rules, but wanted to apply them in a way that improved benefits for the EU economy. The official said European banks needed the chance to scale up in their domestic market as US banks have done.

Finance Watch, a non-governmental organisation, criticised the approach. Julia Symon of Finance Watch said lowering capital requirements would give banks one-time room on their balance sheets but would not necessarily mean more productive investment in the economy. She said it would undermine banks' future lending capacity.

EU financial services commissioner Maria Luis Albuquerque told journalists that Europe's banking sector was still too fragmented along national lines, preventing banks from reaching the size needed to compete globally.

The report appeared to criticise German objections this year to Italian lender UniCredit's hostile takeover of Commerzbank. Without naming any country, the EU said unjustified national interventions too often block EU banks from consolidating and scaling up at the bloc level.

The European Commission plans to propose new banking rules in the first half of 2027.