Europe's top banking supervisor says fragmenting market raises risks

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The increasing fragmentation of Europe's banking system is a 'faultline' that heightens financial vulnerability and saddles everyone with higher costs, the European Central Bank's outgoing head of supervision Andrea Enria has warned.

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30 Oct 2023

Enria, who is stepping down at the end of this year after five years as the ECB’s chair of supervision, told the Financial Times his biggest “personal regret” was how the banking market of the 20-country eurozone was becoming “more and more segmented along national lines”.

“We still maintain this sort of [national] faultline in our institutional arrangements, in terms of integration and in terms of the safety net,” he said. “That’s the main issue that we should fix.”

Enria added that the faultline created an “element of risk”.

“If you have a shock hitting a part of the banking union, the banking sector doesn’t work as it could as a shock absorber by absorbing losses in one country through profits in another country,” he said.

Banks across Europe have been criticised for not passing on the sharp rise in