Skip to content

ECB encourages European cross-border banking integration

The ECB is actively pursuing cross-border banking integration. Both Andrea Enria, chair of the ECB’s Supervisory Board, and Édouard Fernandez-Bollo, member of the same Board, have recently been arguing for banks to take European banking integration into their own hands to smooth the path to a complete banking union. While the ECB does not favour one particular organisational structure, it encourages banks to consider corporate reorganisation and rely more extensively on branches and direct provision of services. In particular, the post-Brexit approach of non-EU banks of setting up a central EU hub through the European Company statute and then branching out was lauded.

Status quo

Despite legislative progress towards a more unified regulatory framework, the European banking sector continues to be segmented along national lines. Therefore, it lacks economies of scale which would enable it to compete globally, particularly with banks in the much better integrated U.S. market. 
Hitherto most European banks have grown within the Union by acquiring local banks and integrating them into their network rather than by establishing branches or fully integrating subsidiaries by transforming them into branches at a later stage. 

Obstacles to cross-border integration

Enria identified three key issues with the current legal prudential framework that hindered cross-border integration impeding the transfer of capital and liquidity resources between member states:

  1. While prudential requirements apply at both individual level and consolidated level, the intragroup waivers are unavailable for cross-border affiliates for capital, large exposure and leverage requirements;
  2. Cross-border liquidity waivers are available, yet some member states continue to impose limits on intragroup exemptions from large exposure requirements;
  3. Continued competence of member states to enact macro prudential measures over and above EU rules.

He said that while legislative reform was desirable to remove these obstacles, it was unlikely to be enacted in the near future. 

Ways towards an integrated banking sector 

Enria suggested several possible routes for furthering banking integration:

Reinforcement of subsidiary structure through intragroup contracts

One option is the continued reliance on a subsidiary structure. This organisational structure could be further integrated through contractual agreements approved by the supervisors. Regulatory concerns of national competent authorities that parent entities would stop support of struggling subsidiaries in a crisis, could be alleviated by enshrining the support in ECB approved group’s recovery plans.

Corporate reorganisation into a branch structure

Alternatively, banks could make increased use of fundamental freedoms of establishment and provisions of services and reorganise into a branch structure.

There are several examples of successful reorganisation from a subsidiary structure into a branch structure and the corresponding efficiency gains and savings that the banks involved reported. Enria all but urged credit institutions to explore this possibility and asked banks contemplating such measures to liaise with the ECB at an early stage.

While framing an integrated credit institution as the best way forward in the path towards a full banking union, Enria also acknowledged existing obstacles that lay outside the remit of financial regulation, such as diverging tax laws or consumer protection rules.

Enria also addressed an issue with the Deposit Guarantee Schemes Directive which in Article 14(3) limits the transferability of contributions to a national Deposit Insurance Scheme to those made in the preceding 12 months. Naturally, such limit disincentives cross-border integration. He emphasised that the ECB supports legislative reform of the provision as recommended by EBA in 2019.

Making use of the European Company statute

Finally, the idea of setting up a European company (Societas Europea, SE) in one member state, and branching out from there across the Eurozone, was mentioned as an approach third-country banks had followed but EU banks thus far had not.


It appears from these officials’ statements that the ECB sees the future of the banking union lying equally in the hand of markets participants and supervisory authorities and hopes a bottom-up approach will prompt member states to come to a political agreement on completion of the banking union.

While emphasising its neutrality as to banks' organisational structure, it is clear that the ECB would welcome and support consolidation in the sector and corporate reorganisation towards a banking landscape with more integrated banking groups. Citing the example of the SE amounts to remarkable supervisory encouragement for banking integration.

In line with this vision, the ECB has already published a guide on the supervisory approach to consolidation in the banking sector in January 2021 to clarify its approach to the prudential treatment of banking consolidation.

Further Reading

Read the full speech of Andrea Enria from 9 September 2021 here.

Read his December 2021 interview here.

Read the interview with Édouard Fernandez-Bollo here.

Read the ECB guide on the supervisory approach to consolidation in the banking sector here.