European Commission acknowledges trade finance in plans to boost EU banking competitiveness

Brussels signals review of prudential framework as industry welcomes recognition of trade finance’s role

The European Commission has outlined plans to strengthen the competitiveness of the EU banking sector, with proposals that could pave the way for a more risk-sensitive regulatory framework for trade finance.

Published in July as part of the Commission’s Savings and Investments Union (SIU) strategy, the Communication sets out a roadmap to improve cross-border banking and reassess elements of the EU’s implementation of Basel III that may be limiting banks’ ability to lend. The Commission intends to present a legislative package in the first quarter of 2027.

For the trade finance industry, the Communication is notable for its explicit recognition that aspects of the current regulatory framework may be constraining financing capacity at a time when European policymakers are seeking to improve competitiveness and support economic growth.

The Commission identified three challenges facing the banking sector. These are 1) continued fragmentation across national markets, 2) certain elements of the Basel III framework that do not always reflect the characteristics of the EU banking landscape, and 3) regulatory complexity that it says has become unnecessarily burdensome.

Basel III implementation under review

While reaffirming its commitment to international banking standards, the Commission said it will reassess how certain Basel III requirements have been implemented in the European Union.

Among the measures outlined are a review of prudential rules that “may be in some cases limiting the lending capacity of EU banks”, alongside possible revisions to corporate governance and prudential requirements to better reflect differences among banks.

The Communication also proposes removing barriers to cross-border banking, allowing banking groups to deploy capital and liquidity more efficiently across the Single Market.

European Commission President Ursula von der Leyen said the objective is to support growth while preserving financial stability. “Getting capital flowing is how we will get Europe growing. Our Savings and Investments Union needs a strong, competitive banking sector at its heart,” she said.

ICC welcomes recognition of trade finance

The proposals have been welcomed by the International Chamber of Commerce (ICC) Banking Commission, which has spent several years advocating for a more risk-sensitive regulatory treatment of trade finance.

In a LinkedIn post, ICC Banking Commission Chair Florian Witt said he was pleased that the European Commission had explicitly recognised the importance of trade finance in its work on strengthening the competitiveness of the EU banking sector.

Image shared by Florian Witt via LinkedIn

Witt said the acknowledgement reflected years of engagement between the ICC Banking Commission and European policymakers, adding that trade finance had consistently proven to be a “low-risk, high-impact business” that supports international trade, SMEs, and a resilient economy overall.

He described the Commission’s recognition as “an important step” and said the industry looked forward to continuing discussions with policymakers to ensure future regulation better reflects the characteristics of trade finance and supports sustainable growth.

The Commission will continue gathering stakeholder feedback before publishing its legislative proposals in early 2027.