Claudia Buch: European banking integration - harnessing the benefits, containing the risks

Speech by Prof Claudia Buch, Chair of the Supervisory Board of the European Central Bank, at the Warsaw School of Economics, Warsaw, 10 April 2025.

The views expressed in this speech are those of the speaker and not the view of the BIS.

Thank you very much for inviting me to speak here today. Poland's presidency of the Council of the European Union comes at time of exceptional uncertainty. The global economy is under strain from heightened geopolitical risks, trade tensions, and financial market volatility. Within Europe, this is adding to the pressure to revive growth and deepen the integration of the Single Market. Poland's economic history holds important lessons, having made the transition from a centrally planned economy four decades ago to being a fully-fledged member of the EU for two decades.

I would like to focus on banking integration, one of the banking union's main objectives and a key component of Poland's economic transformation. Although more than ten years have passed since the banking union was established, its objectives could not be more relevant today. The banking union has clearly delivered in terms of providing better, more harmonised supervision, a stronger regulatory framework and a resolution regime. European banks have proven to be resilient to recent shocks, including the COVID-19 pandemic, the energy crisis and the banking market turmoil of March 2023. Better regulation and supervision have made a significant contribution to this, as has policy support for the real economy.

Yet hopes that the banking union would lead to closer integration of banking markets across Europe have not fully materialised. Cross-border mergers have remained relatively rare, about 75% of banks' lending portfolios are invested in their home markets, and few banks have truly European business models.

Promotion of the Single Market for banking services by removing barriers to integration would offer many benefits. This would allow for better diversification of risks and better use of scale and scope. Banks could develop European strategies as a response to the digitalisation of financial services. Recent reports on the European economy stress the need to strengthen productivity by harnessing the Single Market's scale, improving access to equity finance, reforming the labour market and implementing structural reforms. Consumers would benefit from these measures, which would also help to promote growth. Although these reports focus mainly on the real economy, similar factors are at play in the banking sector.