EU Banking Sector Too Fragmented to Fund Bloc's Digital, Defense Goals, EBA Chair Warns

Europe's fragmented banking market is preventing lenders from achieving the scale needed to finance the continent's digital, economic-security and defense ambitions, European Banking Authority Chair François-Louis Michaud said on September 24, 2026. "We know that Europe needs to finance all those transformations: digital, environment, demographic, economic security and defense," Michaud told Reuters. "It's existential for the future of Europe." Michaud said mergers are not the only solution, emphasizing that greater cross-border lending and financial integration are equally important. Differences in tax, insolvency and consumer-protection regimes make it expensive for banks to offer standardized products across the bloc and achieve economies of scale, he added. As a result, European wholesale banking has dwindled, with a growing share of funding provided by non-bank financial institutions, private-credit firms and players outside the bloc. Michaud said the EBA aims to reduce regulatory red tape and simplify European capital rules, while preserving resilience, to help EU banks compete with US rivals.