European Union capital requirements on megabanks: the low road or the high road

In the second half of 2026, banking issues are expected to gain prominence within the broader European Union Savings and Investments Union (SIU) project, in parallel with continued discussions on capital-markets reform. We focus on capital requirements on the very largest banks, or megabanks. We consider these in their historical context and compared to similar banks in the United States, the EU’s main peer banking jurisdiction. We find that, at end-2024, requirements on US megabanks were generally stricter than requirements on EU megabanks and the minimum levels under the Basel Framework, in line with longstanding US practice.

We also find a marked change by end-2025 under the second Trump administration, erasing much of the prior discrepancy between EU and US requirements. Even so, at this point the US is not actually undercutting EU requirements and is therefore not creating crippling competitive pressures for EU megabanks. Furthermore, some current US banking-sector policies are reckless, following a ‘low road’ of deregulation and de-supervision that increases systemic risk rather than long-term competitiveness.

History suggests that low roads lead to ruin. EU policymakers must instead address lingering EU banking policy fragmentation, even within the euro area, and tackle the roots of current complexity in capital requirements and in banking regulation more generally. Building on the successes of integrated euro-area microprudential bank supervision, the EU should aim at similar integration of macroprudential bank policy and crisis response, while more consistently supporting the Basel Framework to help mitigate future international systemic shocks.

For their substantial feedback, the authors thank Valerio Bacchetti, Ravi Balakrishnan, Jesper Berg, Sylvain Broyer, Claudia Buch, Fredrik Bystedt, Christopher Cant, Jacopo Carmassi, Ali Cavalla, Nicolas Charnay, James Chew, Rebecca Christie, Linas Čiapas, Tom Dechaene, Sharon Donnery, Édouard Fernandez-Bollo, Andrea Filtri, Hans Geeroms, Michael Gibson, Martin Gruenberg, Patrick Honohan, Stefan Ingves, Daniel Kapp, Christine Sif Fuchs Larsen, Katja Lautar, Álvaro López Barceló, Ivo Maes, Stan Maes, Cyprien Milea, Robert Ophèle, Cosimo Pacciani, Peter Palus, Laura Parisi, Birger Buchhave Poulsen, Peter Praet, Massimiliano Rimarchi, Eoin Sheanon, Graham Steele, Katja Taipalus, Jukka Topi, Ángel Ubide, Harald Waiglein, Guntram Wolff, and Ianna Georgieva Yordanova. Adam Posen and Jeromin Zettelmeyer are thanked for their encouragement and support. Opinions expressed are the authors’ alone.