Brussels' plan aims to make the EU's banking landscape more seamless by lowering country level hurdles for pan European lenders, simplifying slices of capital structure, and refining how certain activities, including trade finance, are regulated. The timing is no accident. European banks say they are falling behind U.S. rivals that have benefited from a friendlier rulebook in America.
Behind closed doors, Berlin has argued for breaking the project into phases, according to people familiar with the talks. At last weekend's gathering of EU finance ministers, German Finance Minister Lars Klingbeil floated a two tier approach: push through the straightforward simplification items first, while tackling trickier topics on a parallel track. That stance lines up with Dombrovskis, who is leading the Commission's broader effort to slash bureaucracy and wants to slice the package so the de burdening pieces move early. Albuquerque rejected the carve up last week, setting up a potential internal clash over how to advance the law.
Germany and Dombrovskis find themselves aligned with big European lenders that prefer a staggered timeline. One flashpoint is any move toward a pan EU deposit backstop, which supporters of the split want to shelve for later. Berlin's finance ministry told Bloomberg News it backs giving "priority" to measures that "directly contribute to the goal of competitiveness and drive investment," adding that "experience has shown that structural issues related to the single market and the banking union are more complex." The tug of war comes after heavy pushback from the industry.
Europe's largest banks have warned that getting bogged down in deposit insurance wrangling could sink the wider plan with a busy European election calendar coming up next year. On Tuesday, Bloomberg reported that major banks and trade groups are challenging key elements of the Commission's bid to reinvigorate the bloc's financial system.
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Banks, lobby groups, and others filed 121 consultation responses by the Sept. 15 deadline, urging cuts to some proposals, fresh additions elsewhere, and faster timelines. The feedback underscores how complicated this is going to be. Any final law needs sign off from both the European Parliament and EU governments. A Commission spokesperson declined to comment.
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