1 Introduction

Ladies and gentlemen,

Four decades is a long time – especially in the world of finance. And, in these four decades, we have seen fundamental change not only in the world of finance, but also in Europe. During this time, our continent has made enormous progress towards integration: the fall of Iron Curtain, the creation of the European single market, and the introduction of the euro. Many economic borders in Europe have since disappeared – but, with regard to integrating Europe’s financial markets, there is still room for improvement.

It is particularly important to make progress here, because Europe now needs to finance substantial investment into AI, the energy supply, and decarbonisation. The Draghi Report put these additional investment needs at between 750 and 800 billion euro per year up until 2030.[1] Such expenditure cannot be met using public funds alone. This is because, on top of this, expenditure is needed to strengthen defence capabilities. And, in order to mobilise sufficient private funds for this purpose, the performance of the European financial system needs to improve significantly.

In my speech today, I would therefore like to talk about the current situation and the outlook for the Savings and Investments Union. However, I will bookend this part with a brief overview of the status quo of the European financial system at the start and then the state of play with regard to simplifying banking regulation at the end.

2 Europe’s financial system: resilient, but at a structural disadvantage

Where does the European financial system stand today, and how is it doing? At present, Europe’s banks are pleasingly robust. This was particularly evident during the banking turmoil in the spring of 2023. Although tensions spread to European bank shares and bank bonds, these remained limited and short-lived in the euro area. Strong capital and liquidity buffers amongst European banks played an important role here.[2] They have maintained this solid starting position: the European banking sector remains strong in terms of capital and liquidity in 2026, too.[3] The experiences of 2023 show us that resilience is a valuable asset – and it should not be jeopardised by future reforms to banking regulation, either. At the same time, we should not consider ourselves satisfied with the stability of European banks: we must also ask ourselves how competitive they are by international standards.

In this regard, it is important to first put things into context: European and non-European banks are much more rarely in direct competition than might be assumed. Analyses by our banking supervisors show, for example, that German and US banks only rarely compete with each other directly in local credit markets. It is a different situation for investment banking and trading. In this sector, globally active big banks meet directly in international competition. Measured in terms of banks’ overall capital requirements, however, these activities play a significantly smaller role than traditional lending business. For corporate loans, for example, German banks are therefore primarily in competition with other German and European institutions – and less so with large US banks. Nevertheless, it is worth taking a look across the Atlantic. This is because a comparison can show where Europe’s banks stand by international standards – and where potential structural disadvantages lie.

US banks – and, in some cases, British banks – are ahead of European institutions in key performance indicators, such as net interest margins and price-to-book ratios.[4] At this point, some people may be tempted to explain the lower profitability by an overcapitalisation of European banks. However, studies conducted by the ECB and the Bundesbank tell a different story: according to these, higher capital ratios reduce interest expenditure and fluctuations in earnings.[5] This allows banks to lower their risk premia for refinancing, which increases their profitability.

The structural weakness instead lies elsewhere: US banks benefit from deep and liquid capital markets as well as a highly integrated financial system, while Europe’s banking and capital markets remain fragmented. This makes it more difficult to allocate capital efficiently and to exploit economies of scale. In addition, there are different, complex and, in some cases, contradictory regulatory requirements in various European countries, which exacerbate these structural inefficiencies even further.[6] On balance, this paints a mixed picture: Europe’s banking sector is resilient – but structural inefficiencies are holding back its performance.

3 The Savings and Investments Union: making better use of Europe’s capital

The challenge is therefore not a matter of quickly freeing up money and reducing the resilience of our banks through deregulation, but of improving the performance of our financial system on a lasting basis. This is precisely where the Savings and Investments Union comes in. Its aim is to better connect savings with productive investment, and thus more closely integrate both the capital markets and the European banking market. This is intended to strengthen the EU’s competitiveness, resilience, and strategic autonomy.[7] 

This is not about one single major reform, but rather many interlocking building blocks, such as: 

• efficiently regulating and supervising the European securitisation market; 

• reducing fragmentation in trading venues, clearing houses, and securities settlement entities; 

• promoting distributed ledger technology and tokenisation in European trade; 

• promoting the European market for venture and growth capital; 

• harmonising capital market supervision; 

• simplifying banking supervision and creating a genuine internal market for banking; 

• and implementing measures for pensions and financial literacy.

The news from Brussels shows that we are currently well on the way to making the Savings and Investments Union a reality. This is because political memoranda of understanding are turning into concrete legislative proposals. Allow me to name a few of them.

In June 2025, the European Commission presented a legislative proposal to reform the securitisation market. At the end of last year, this was followed by the market integration and supervision package. The aim, amongst other things, is to reduce the fragmentation in trading venues and CSDs that I mentioned earlier on. A general agreement on the package was reached at last week’s meeting of the Economic and Financial Affairs Council.[8]

In March, the European Commission also delivered a proposal for a harmonised corporate legal regime across the EU in the form of the 28th regime – also known as “EU Inc.”. The 28th regime aims to make it easier to start a business and improve financing conditions and growth opportunities for start-ups and scale-ups. And, this summer, the European Commission presented potential measures to strengthen Europe’s banking sector.[9]

I also believe that the “One Europe, One Market” roadmap, which has set an ambitious timetable for implementing the individual initiatives, will help ensure success. One goal is to agree on the specific design of the 28th regime by the end of this year. And, according to the timetable, the agreement on reforming the European securitisation framework that will have been reached by then should enter into force as early as the beginning of next year. In the first quarter of 2027, the European Commission is planning to present a legislative proposal to amend the European banking framework. 

The Savings and Investments Union will give European enterprises access to a larger and more diverse set of investors, thus making it easier to finance investment projects. Deeper European equity and venture capital markets could therefore help more European start-ups to become European scale-ups and, ultimately, global enterprises.

But banks, too, stand to benefit from deeper capital markets. Here, banks and capital markets should not be seen as competitors. Instead, an efficient capital market can actually strengthen banking business. For instance, a larger securitisation market may allow banks to pass on risks to capital market investors and release tied-up capital for new loans. Securitisation acts as a bridge between bank financing and the capital market.

But it is not only the capital markets that hold considerable potential for the banking sector. Europe’s internal market for banking is also far from complete. More efficient cross-border capital and liquidity management and a common European deposit insurance scheme are needed, in particular. The cross-border management of capital and liquidity hinges on appropriate safeguards. These safeguards should ensure that foreign parent companies support their subsidiaries in the event of a crisis. Reducing high concentrations of sovereign debt could go a long way towards refining the institutional architecture of the banking union.[10] Moving forward on these points would make it easier for European banks to operate across borders and tap into economies of scale.

4 Banking regulation: as much as necessary, as simple as possible

That said, more integration alone could be particularly beneficial for enterprises with large economies of scale. Europe’s banking landscape also thrives on its diversity, consisting as it does of internationally active big banks, savings banks, cooperative banks, and other, smaller, institutions. That’s why a common market should not result in a uniform business model. Regulation and supervision should therefore take into account the principle of proportionality. This is because smaller banks, in particular, can be disproportionately affected by fixed regulatory and administrative costs.

Another problem is the high complexity of the system of capital and resolution requirements, which can limit the effectiveness of the regulatory framework – for instance, the usability of capital buffers. Against this background, the ECB Governing Council set up a High-Level Task Force on Simplification in 2025.[11] The activities of the Task Force were geared towards simplifying regulatory and supervisory requirements without undermining the resilience of the European banking system. This is because the global financial crisis made us painfully aware of the economic and social consequences of the failure of big banks and the “too-big-to-fail” problem.

The recommendations include reducing the number of elements within the risk-weighted capital and leverage ratio framework. At the same time, the Task Force is proposing a much simpler supervisory regime for smaller banks. To this end, German supervisors have suggested a concept for a European small banks regime, for instance. It would mean that small and low-risk banks would only have to meet a few risk-weighted requirements, if any. This is because calculating and documenting risk-weighted assets is particularly time-consuming. In return, small banks would have to meet a higher leverage ratio – meaning they would have to hold more tier 1 capital relative to non-weighted assets. 

The proposals of the Task Force have now been incorporated into the European reform process. In April this year, the Eurosystem included them in its response to the European Commission’s consultation on the competitiveness of the European banking sector.[12] Now the ball is in the European Commission’s court. As I mentioned before, it intends to present concrete legislative proposals for amending Europe’s banking framework in the first quarter of 2027. This draft legislation also includes the suggestions for simplification. 

5 Closing remarks

To conclude, I would like to echo the point I made at the beginning of my speech. Over the past 40 years, we in Europe have witnessed the many possibilities that can be achieved through economic integration. The integration of the financial markets is not yet complete. There is still a great deal of potential to be unleashed there. The Savings and Investments Union could help to channel Europe’s savings more effectively into investment, innovation, and growth. Simplifying regulation would reduce the complexity of banks’ capital requirements without jeopardising the stability that has been achieved. These two projects will make Europe’s financial system more productive and boost investment.

Looking back over the last 40 years inspires confidence. What seemed so far off in terms of the single market and the single currency back then has now become everyday reality in Europe. And I firmly believe that we are now poised to ensure that, in 2066, our descendants will be able to look back on 40 years of equally impressive progress in European integration as we can today.

Footnotes:

1. Draghi, M. (2024), The future of European competitiveness.
2. De Guindos, L. (2023), A resilient banking sector for the euro area, speech delivered on 17 May 2023.
3. European Banking Authority (2026), EU/EEA banks remain resilient amid rising geopolitical, market and technological risks, press release dated 18 June 2026.
4. Beck, T., B. Bruno and E. Carletti (2025), How have European banks developed along different dimensions of international competitiveness?, in ECTI | Economic Governance And EMU Scrutiny Unit (EGOV).
5. Behn, M. and A. Reghezza (2025), Capital requirements: a pillar or a burden for bank competitiveness?, ECB Occasional Paper Series No 376, October 2025; Buchholz, M., A. Loeffler and P. Sigel (2025), Do capital requirements and their international differences affect banks' profitability?, Deutsche Bundesbank Discussion Paper No 31/2025.
6. Theurer, M. (2026), Competitiveness of the German banking sector: the interplay between regulation and competitive conditions, speech delivered on 7 May 2026.
7. European Council (2026), Savings and investments union: Council agrees key elements of crucial measures to deepen EU capital markets, press release dated 9 October 2026. 
8. ibid.
9. European Commission (2026), Commission outlines measures to strengthen Europe’s banking sector and support growth, press release dated 17 July 2026. 
10. Deutsche Bundesbank (2026), Fiscal risks and financial stability: reform options for the sovereign-bank nexus in the euro area, Monthly Report, September 2026.
11. European Central Bank (2026), Simplification of the European prudential regulatory, supervisory and reporting framework. 
12. European Central Bank (2026), Eurosystem response to the EU Commission’s targeted consultation on the competitiveness of the EU banking sector, p. 26.