The Council and the European Parliament have agreed on the EU’s annual budget for 2026. Next year’s budget will focus on delivering Union priorities and dealing with ongoing challenges. It will boost competitiveness, strengthen Europe’s defence readiness and preparedness, provide support for humanitarian assistance and address migratory pressures.
At the same time, the budget safeguards the flexibility to react swiftly and effectively to unforeseen needs and crises.
The 2026 budget amounts to €192.8 billion in total commitments and €190.1 billion in total payments. €715.7 million has been kept available this year under the expenditure ceilings of the current multiannual financial framework for 2021-2027, allowing the EU to react to unforeseeable needs.

“Today’s agreement shows that Europe can deliver, even in challenging times. The 2026 EU budget will allow us to deliver on our common priorities – security, competitiveness and border control – all while ensuring that the EU can react swiftly and effectively to unforeseen needs and crises.”
– Nicolai Wammen, Minister for Finance of Denmark and chief Council negotiator for the 2026 EU budget

 
2026 EU budget (in € million)

Headings
Commitments
Payments

1. Single market, innovation and digital
22,163.0
23,336.6

2. Cohesion, resilience and values
71,649.8
73,166.7

3. Natural resources and environment
56,529.4
52,577.3

4. Migration and border management
5,018.9
3,887.9

5. Security and defence
2,813.5
2,253.3

6. Neighbourhood and the world
15,600.0
16,569.7

7. European public administration
13,277.5
13,277.5

Special instruments
5,715.9
5,022.5

Total
192,768.1
190,091.6

Appropriations as % of GNI (gross national income)
1,00%
0,99%

Commitments are legal promises to spend money on activities whose implementation extends over several financial years. Payments cover expenditure arising from commitments made for the EU budget during current and preceding financial years.
This is the sixth annual budget under the EU’s long-term budget, the multiannual financial framework (MFF) for 2021-2027. The 2026 budget is complemented by actions to support the COVID-19 recovery under NextGenerationEU, the EU’s plan to recover from the COVID-19 pandemic.
Next steps
The European Parliament and the Council now have 14 days to formally approve the agreement reached. The Council is expected to endorse it on 24 November. Adoption of the budget requires a qualified majority within the Council.
 
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The European Commission’s Autumn 2025 Economic Forecast shows that growth in the first three quarters of 2025 outperformed expectations. While the strong performance was initially driven by a surge in exports in anticipation of tariff increases, the EU economy continued to grow in the third quarter. Looking ahead, economic activity is expected to continue expanding at a moderate pace over the forecast horizon, despite a challenging external environment.
This year’s Autumn Forecast projects real GDP to grow by 1.4% in the EU in 2025 and 2026, edging up to 1.5% in 2027. The euro area is expected to mirror this trend, with real GDP projected to grow by 1.3% in 2025, 1.2% in 2026, and 1.4% in 2027. Inflation in the euro area is forecast to continue its decline, falling to 2.1% in 2025, and to hover around 2% over the forecast horizon. In the EU, inflation is set to remain marginally higher, falling to 2.2% in 2027. 
Private consumption and investment drive growth
Latest business indicators and survey data point to sustained positive momentum in the coming quarters. Looking further ahead, the global environment remains challenging, but a resilient labour market, improving purchasing power and favourable financing conditions are set to support moderate economic growth.
In addition, the Recovery and Resilience Facility and other EU funds are cushioning the effect of fiscal consolidation in several Member States. This support underpins domestic demand, which is set to be the main driver of growth over the forecast horizon. Private consumption is expected to grow steadily, supported by the above factors, but also by a gradual decline in the saving rate. Investment is set to regain momentum, mainly driven by non-residential construction and capital spending on equipment.
The EU’s highly open economy remains susceptible to ongoing trade restrictions, but the trade deals reached between the US and its trading partners, including the EU, have alleviated some of the uncertainties that overshadowed the Spring Forecast.
The forecast assumes that all country- and sector-specific tariffs implemented by the US administration at the cut-off date of 31 October will be in place throughout the forecast horizon. Globally, trade barriers have reached historic highs, and the EU now faces higher average tariffs on exports to the US than assumed in the Spring 2025 Forecast. Nevertheless, tariffs on EU exports remain lower than those applied to several other major global players. This represents a modest relative advantage for the EU economy, albeit in a context of weak global goods trade and a strong euro tempering foreign demand.
Inflation projected to stabilise
Inflation in the euro area has been revised slightly up from the Spring Forecast. It is now expected to come down from 2.4% in 2024 to reach the ECB’s target of 2% in 2027. Trends vary across components, with decreases in services and food inflation counterbalanced by rising energy inflation. Intensifying competitive pressures from imports and the appreciation of the euro should restrain inflation in non-energy goods. Headline inflation in the EU is projected to be marginally higher than the euro area, gradually declining from 2.6% in 2024 to 2.2% in 2027. This forecast assumes that the new EU Emissions Trading System (ETS2) will enter into force in 2027, as has been legislated.
Unemployment rates decline further
The gradual slowdown of employment growth that started in 2022 continued in the first half of 2025. Still, the EU economy generated 380,000 jobs during that period. Employment is set to continue expanding moderately—by 0.5% in 2025 and 2026—before decelerating to 0.4% in 2027. The unemployment rate is anticipated to edge down further from 5.9% in 2025 and 2026 to 5.8% in 2027. Wage growth in the EU is set to slow but remain above inflation, modestly improving household purchasing power.
Government deficits to edge up 
The EU general government deficit is expected to increase from 3.1% of GDP in 2024 to 3.4% by 2027, partly due to the increase in defence spending from 1.5% of GDP in 2024 to 2% in 2027, measured according to the Classification of the Functions of Government (COFOG).
The EU debt-to-GDP ratio is projected to rise from 84.5% in 2024 to 85% in 2027, with the euro area ratio set to rise from around 88% to 90.4%. This reflects ongoing primary deficits and the fact that the average cost of public debt is higher than nominal GDP growth. By 2027, four Member States are expected to have debt ratios above 100% of GDP.
Challenging global environment continues to weigh on the outlook
Looking forward, risks to the growth outlook are tilted downwards.
Persistent trade policy uncertainty continues to weigh on economic activity, with tariffs and non-tariff restrictions potentially constraining EU growth more than expected.
Any further escalation of geopolitical tensions could intensify supply shocks. At the same time, repricing of risks in equity markets, especially in the US technology sector, could impact investor confidence and financing conditions. Domestic political uncertainty might also weigh on confidence. Finally, the increasing frequency of climate-related disasters could undermine growth.
On the upside, resolute progress on reforms and the competitiveness agenda, higher defence spending focused on EU production, and new trade agreements could bolster economic activity more than projected. 
Background
This forecast is based on a set of technical assumptions concerning exchange rates, interest rates and commodity prices, with a cut-off date of 27 October. For all other incoming data, including assumptions about government policies, this forecast takes into consideration information up until, and including, 31 October. Unless new policies are announced and specified in adequate detail, the projections assume no policy changes.
The European Commission publishes two comprehensive forecasts (spring and autumn) each year, covering a broad range of economic indicators for all EU Member States, candidate countries, EFTA countries and other major advanced and emerging market economies.
The European Commission’s Spring 2026 Economic Forecast will update the projections in this publication and is expected to be presented in May 2026. 
 
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Today the Council adopted new rules to improve cooperation between national data protection bodies when they enforce the General Data Protection Regulation (GDPR) in order to speed up the process of handling cross-border data protection complaints.
The measures adopted will streamline administrative procedures relating to, for instance, the rights of complainants or the admissibility of cases, and thus make enforcement of the GDPR in cross-border cases more efficient.
Main elements of the new EU regulations
• Admissibility: The requirements for the admissibility of cross-border action – the decision if a complaint meets the conditions for being investigated – will be harmonised. Regardless of where in the EU a complaint is filed, admissibility will be judged on the basis of the same information.
• Rights of complainants and parties under investigation: Common rules will apply for the involvement of the complainant in the procedure, the right to be heard for the company or organisation that is being investigated as well as the right to receive the preliminary findings in order to express their views on it.
• Simple cooperation procedure: For straightforward cases data protection authorities can decide, in order to avoid administrative burden, to settle actions without resorting to the full set of cooperation rules.
• Deadlines: In the future an investigation should not take more than 15 months. For the most complex cases this deadline can be extended by 12 months. In the case of a simple cooperation procedure between national data protection bodies, the investigation should be wrapped up within 12 months.
Next steps
Today’s adoption by the Council is the final legislative step. The regulation will enter into force 20 days after its publication in the Official Journal of the EU. It will become applicable 15 months after its entry into force.
Background
The GDPR has put in place a system of cooperation between national data protection bodies. Those authorities, which are responsible for enforcing the GDPR, are obliged to cooperate when a data protection case concerns cross-border processing. This is the case, for instance, when the complainant resides in a member state other than that of the company under investigation.
In such cross-border cases, a single national authority will take on the role of lead authority in the investigation, but is required to cooperate with its counterparts in other member states.
 
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Keynote speech by Frank Elderson, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, at the ECB Forum on Banking Supervision 2025
It is a pleasure to deliver the last keynote speech of this year’s banking supervision forum. Over the past two days, we have discussed what resilience means in times of challenge, complexity and disruption – and why resilience should be broad based.[1] As the Chair mentioned yesterday morning, broad-based resilience is about strong financials, but equally about operational resilience, sound governance and good risk management.
During this period of profound change, a debate on European competitiveness has emerged with full force. Many are asking what the key impediments and main enablers might be for a more competitive European economy. How can we tackle the former and improve the latter? And what role does the banking sector play in shaping the competitiveness of the real economy?
The good news is that over the past decade, much has already been achieved to make banks more resilient, and this resilience remains the indispensable foundation to support the real economy throughout the economic cycle. I will therefore start by illustrating this very welcome healthy state of the banks under our supervision.
At the same time, discussions about the complexities that are having an impact on European banks’ competitiveness have gained prominence. Today I would like to highlight how we are tackling undue complexities in the regulatory and supervisory framework in order to help banks operate efficiently within a predictable, proportionate and risk-based framework.
I will then illustrate how banks’ competitiveness crucially hinges on structural and macroeconomic factors that will require a concerted effort from a wide range of stakeholders. In this way, Europe’s banking system can be both innovative and strong, competitive and resilient. So, let me first start by looking at the resilience I mentioned at the start.
Bank resilience is crucial to withstand shocks and support the economy at all times
Resilient banks are a vital precondition for a thriving real economy. Why is this so?
Well-capitalised and resilient banks are better placed to channel funds from savers to borrowers to enable businesses to innovate, households to buy homes and governments to finance public goods. Banks must therefore be well regulated and supervised.[2]
European banking supervision was established in 2014 in response to the global financial crisis and subsequent European sovereign debt crisis. Now, almost to the day 11 years later, banks under our supervision are significantly stronger. Thanks to regulatory guardrails, rigorous supervision and continued improvements in banks’ risk management, the banking sector is now in a much better position to fulfil its essential function of supporting the economy at all times.
Today’s euro area banks have solid capitalisation levels, with a Common Equity Tier 1 (CET1) capital ratio of 16% compared with 12.7% a decade ago.[3]

Chart 1
Capital adequacy

Source: ECB supervisory banking statistics.

Banks have robust liquidity positions well above regulatory requirements[4] and the asset quality problems that plagued many significant banks across Europe a decade ago have been successfully tackled. In fact today the non-performing loans ratio stands at 1.9%, less than a third of the level observed ten years ago.[5]

Chart 2
Asset quality

Source: ECB supervisory banking statistics.

Moreover, euro area banks’ profitability has improved, with their return on equity now standing at 10.1%.

Chart 3
Euro area banks’ return on equity

Source: ECB supervisory banking statistics.

Encouragingly, stronger profitability is increasingly reflected in the higher valuations investors attribute to euro area banks, as shown by a price-to-book value of over 1.

Chart 4
Euro area median price-to-book ratio for publicly listed significant institutions (daily data)

Source: ECB calculations based on Bloomberg data

In addition to financial resilience, euro area banks have also improved their risk management and governance[6], and boosted their operational resilience[7].
Thanks to broad-based resilience banks have been an anchor of stability in undeniably challenging times.
In the past five years alone, we have dealt with the worst pandemic since the 1920s, the most devastating war on European soil since the 1940s, and the biggest energy shock and rise in inflation since the 1970s. Moreover, we are now seeing tariff levels and “beggar-thy-neighbour” trade policies reminiscent of the 1930s and a resurgence of great power rivalry similar to the Cold War of the 1950s, all while the climate and nature crises are getting worse.
Against this backdrop of change and complexity, the euro area banking system has fared well. Banks remained resilient and did not propagate shocks.. And this is no coincidence: well-capitalised and resilient banks do not excessively retreat in downturns, propagating adverse dynamics; instead, they continue to support the economy.[8] Think about what happened during the pandemic: banks continued to supply credit to struggling businesses and households, even in the direst of circumstances. Better capitalisation therefore makes the banking sector more resilient and better able to fund the real economy in good as well as bad times.[9] Fiscal and monetary support to households and firms clearly helped to shield the banks from higher credit losses.
So resilient banks yield a double dividend: not only are they safer and hence better able to withstand shocks, but they are also better able to continue playing their vital role of supporting the economy at all times. In that sense, resilient banks play an important role in contributing to competitiveness, especially in a bank-based economy like Europe.
Resilience must not, however, lead to complacency in an environment that continues to be complex and, in certain aspects, is becoming increasingly challenging. Geopolitical tensions are not expected to subside, ever more frequent and severe cyberattacks are here to stay, and the substantial growth of non-bank financial institutions, including their interconnectedness with the banking sector, demand our continued vigilance.[10]
Reducing undue complexities, overlaps and costs that may hinder competitiveness
At the same time we hear voices loud and clear about undue complexities in the regulatory and supervisory framework that may negatively impact banks’ competitiveness.
Looking at how the regulatory and supervisory framework evolved since the start of the banking union there is undoubtedly an increase in size but also complexity which is shaped by several factors.
A root cause of this complexity lies in the persistent fragmentation of rules at national level. Many facets of the current prudential framework, for example, do not actually consist of a single European regulation but of a patchwork of nationally transposed directives that create complexity. In addition, foundational elements of the prudential framework, such as accounting standards, securities and insolvency laws, continue to differ across Member States, which also adds unnecessary complexity.
Another root cause of this increasing complexity is that regulation and supervision have developed in lockstep with the complexity of the external environment in which the banks under our supervision operate. For example, the framework has evolved to make sure banks are operationally resilient, for instance, to ever more frequent and severe cyberattacks and operational failures.[11]And while this was very much warranted in light of a more complex external risk landscape, it has also led to regulation growing in size.
At the same time there is also a need to identify areas of unwarranted complexity, overlaps and unnecessarily prescriptive elements that may have built up over the past decade and which can and must be simplified.
Against this backdrop, we welcome the debate on simplification. The ECB’s Governing Council has created a High-Level Task Force on Simplification to develop proposals to simplify the European prudential regulatory, supervisory and reporting framework, while still maintaining resilience. The Task Force plans to deliver its proposals for simplification to the Governing Council by the end of the year, after which they will be presented to the European Commission.
As far as European banking supervision is concerned, we have been taking action for quite a few years now. Let me outline some of the initiatives that are already in full swing to make supervision more efficient, more transparent and more risk-based, without sacrificing resilience. This makes sure that we keep bank resilient in an efficient and effective manner and thereby reducing cost factors that may hamper competitiveness. We are proving that simplification and resilience are not opposing forces – they can go very well hand in hand.
The comprehensive reform of the Supervisory Review and Evaluation Process (SREP) that we embarked upon in 2022 is at the heart of our simplification initiatives. We have embraced risk-based supervision through initiatives like the risk tolerance framework and a multi-year approach, which allow our supervisory teams to focus more effectively on the underlying risks that matter the most. Practically speaking, this means that we are not looking every year at every risk in every bank.
The SREP reform is already delivering results: SREP decisions have become shorter and more focused, with SREP measures decreasing from 700 in 2021 to below 400 in 2025, with a stronger emphasis on addressing severe findings.[12] Moreover, issuing decisions by the end of October rather than the end of December means that key findings can be communicated more promptly. We are also enhancing our supervisory planning by improving the alignment of different supervisory activities, which helps banks to avoid duplicating their efforts.
In addition, we are reducing undue complexities and prescriptiveness by streamlining our supervisory processes through our “next-level supervision” project, which covers areas such as decision-making processes, internal models, stress testing, capital-related decisions, reporting and on-site inspections.[13] One concrete example is fit and proper assessments, where, thanks to the help of machine learning and technology, we have reduced processing times so that banks receive faster responses.[14]
Another example is a new fast-track process for simple securitisations, which was tested in the first half of 2025. This new process will cut approval times from three months to just ten working days.
An additional concrete simplification initiative is our drive to reduce reporting costs by establishing an integrated reporting framework that is accessible to statistical, prudential and resolution authorities.
We are also further embracing proportionality, which, although already embedded in the European regulatory and supervisory system, can be expanded further. Currently, small and non-complex institutions (SNCIs), which are banks that meet clear criteria for size, simplicity and limited trading activity, already benefit from lighter reporting templates and simplified liquidity and market risk standards, as well as streamlined recovery and resolution planning.[15] In practice, this means they are only required to report up to 30% of the data that large banks must report. They also benefit from less frequent on-site inspections. Therefore the SNCI regime seems the natural starting point to further enhance proportionality. For instance, one could consider a more systematic application of this regime, as well as an increased scope. These steps could be taken while maintaining the Single Rulebook, which ensures the risk-based nature of the prudential framework is retained for all banks. This is important, because proportionality should not be mistaken for simply reducing prudential standards for all smaller banks, irrespective of the risks this would generate. Instead, we should focus our attention on initiatives that reduce undue complexity, prescriptiveness and cost factors, without making banks less safe or causing them to lose track of the underlying risks.
In addition, while maintaining the current level of financial resilience among supervised banks, there is room to increase the predictability of how our supervisory assessments feed through to banks’ capital requirements. This enhanced predictability would help banks’ capital planning. Moreover, the risk-based capital stack in the EU is admittedly complex. With up to nine different layers of requirements and buffers, each serving a specific purpose that needs to be met with going and gone-concern funding instruments, the system can be difficult to navigate and, at times, create unintended interactions.[16] Thus there seems to be room to make the framework simpler and more transparent while maintaining resilience.
Banking sector competitiveness is shaped by multiple factors
Reducing undue complexities in regulation, supervision and reporting that may hamper banks’ competitiveness is essential. However the ability of euro area banks to compete with other actors – especially their international peers – is primarily shaped by a broad range of other factors, many of which are structural as well as macroeconomic in nature.
This becomes particularly clear when looking more closely at the profitability gap between euro area and US banks.[17] European banks, for instance, have a smaller home market and lower IT investments. US banks are more concentrated, with the largest ones operating across the entire country, which allows them to exert more pricing power and reap the benefits of economies of scale. European banks, on the other hand, do not have access to the same benefits because the Single Market is still fragmented.
Moreover, business volumes and profitability crucially depend on a dynamic real economy. As the Draghi report[18] convincingly shows, real GDP growth in the EU has been subdued in comparison with US growth over the last decade. And the robust economic growth in the United States, partly fuelled by its more advanced capital markets, has provided substantial benefits to banks. Thus, improvements in European banks’ competitiveness crucially hinge on revitalising growth in the European economy.[19]
Another factor shaping banks’ competitiveness is operating efficiency. Although euro area banks’ cost/income ratio has improved from 66% to 54% between 2020 and 2025, since 2021 this has been entirely driven by increasing revenues most notably net interest income, showing that there is still room for improvement when it comes to banks’ cost base.

Chart 5
Drivers of the change in euro area banks’ cost/income ratio

Source: ECB supervisory reporting.
Notes: The data show the year-on-year changes in the cost/income ratio (operating expenses as a share of net total operating income), along with the individual contributions of the numerator (“cost effect”) and denominator (“revenue effect”) to these changes. Lower values indicate an improvement in cost efficiency.

Boosting bank competitiveness by deepening integration and revitalising growth
Considering the myriad factors shaping European banks’ competitiveness and the fact that many of these factors have structural and macroeconomic root causes, real progress requires a concerted effort by a wide range of stakeholders. Let me outline some of the potential avenues that can sustainably move the dial when it comes to banks’ competitiveness.
One promising path for euro area banks to improve their operating efficiency is to enable them to reap the benefits of economies of scale by consolidating the highly fragmented sector. Larger, pan-European banks would also be better equipped to diversify risks, invest in digital transformation and compete in higher-margin, fee-based business areas. Such developments would not only strengthen banks’ competitiveness but also enable them to operate more effectively in the most profitable segments of the financial market, improve their profitability and optimise their liquidity management at the group level. From a supervisory perspective, we have repeatedly stressed that we see the benefits of cross-border mergers and have been crystal clear that we will not obstruct consolidation efforts, provided that the limitative set of regulatory criteria are met. These criteria essentially ensure that a merger results in the formation of a safe and sound bank.
At the same time, the ability of euro area banks to build pan-European business models and scale up their activity is additionally constrained by the fact that the banking union is incomplete. Completing it, including by establishing a European deposit insurance scheme, would help eliminate barriers that still hinder market integration and ensure that euro area banks can scale up and diversify geographically more easily.
Some financial instruments can also play a meaningful role in transferring risks away from credit institutions so that they are better positioned to meet additional lending demands from the real economy, while creating opportunities for financial market investors. As noted in the recently published ECB opinion on the securitisation package, the proposed regulations are a step in the right direction to make further progress at EU level to achieve economies of scale in the development of securitisation products, facilitate the expansion of the market, and support the integration of EU markets, all of which would broadly support the savings and investments union.
However, further integrating banking markets alone is no silver bullet for the competitiveness challenge banks are facing.
Looking at the real economy, the Draghi report shows that the widening GDP gap between the EU and the United States is primarily driven by weaker productivity growth in Europe. And when it comes to productivity, economists largely agree that one key reason for the gap is that Europe is adopting digital technologies more slowly and is unable to fully capture the efficiency gains of the digital transformation. Many firms remain behind the technological frontier.[20] In order to catch up, these firms need access to risk capital and to investors with networks and experience – which is why finalising the savings and investments union is vitally important for more efficient and more integrated capital markets.
Beyond capital market integration, the broader lack of a true Single Market further amplifies Europe’s competitiveness challenge. As I mentioned in a speech earlier this year[21],internal barriers to the Single Market are, on average, equivalent to a tariff of 44% on goods and a staggering 110% on services. And soberingly, 60% of barriers to trade in services are still the same as they were 20 years ago. So in order to boost productivity, unlock competitiveness and promote simplification, a time-limited roadmap to complete the Single Market is more important than ever. In areas where full harmonisation is currently politically or technically unfeasible, alternative approaches, such as introducing a “28th regime”, could provide a practical and effective interim step.
Conclusion
Let me conclude.
Europe stands at an important crossroads: to become a bulwark against external threats, ensure our strategic autonomy, and remain masters of our own destiny with good living standards for all Europeans, our economic prosperity is more important than ever.
And to safeguard our prosperity, we must bolster our competitiveness to ensure Europe is a place where innovators, creators and doers seek opportunity in the world’s second largest market. And if we are to succeed, a concerted effort from a wide range of stakeholders is essential.
Resilient banks have an important role to play. Banks that are innovative, strong and at the service of firms and citizens at all times, are an essential pillar of a competitive real economy.
And as supervisors, our single most important contribution is to make sure that banks continue to fulfil this role. Our job description is clear: maintain the public good that is financial stability. Because history has taught us – often in the hardest way during crises – that without financial stability, growth falters, progress fades, potential flounders, investment stalls, innovation slows and confidence slips away. But with the solid bedrock of financial stability, there is no ceiling to the innovation, progress and prosperity we can unleash.
Thank you for your attention.

Buch, C. (2025), “Global banking, global risks: how banks and supervisors can navigate a complex environment’’, keynote speech at the ECB Forum on Banking Supervision, Frankfurt, 13 November.
The traditional microprudential regulation of banks operates on a well-established logic. Banks finance themselves with high leverage, partly through insured deposits, which play a crucial role in preventing destabilising bank runs (see Diamond, D. W., & Dybvig, P. H. (1983). Bank runs, deposit insurance, and liquidity. Journal of political economy, 91(3), 401-419)). However, high leverage and deposit insurance also creates moral hazard: it incentivises bank managers to take on excessive risks, knowing that potential losses would be absorbed by creditors and taxpayers rather than the bank itself. The primary objective of capital regulation is to counteract this moral hazard by compelling banks to internalise potential losses. Another convincing explanation of the rationale of prudential supervision was outlined in the seminal book by Dewatripont, M. and Tirole, J. (1994), The Prudential Regulation of Banks, which states that supervisors’ task is to monitor banks to ensure they are safe and sound on behalf of depositors, as the latter are too small, dispersed and have neither the time nor the expertise required to understand the risks a bank is taking. That’s why supervisory authorities are assigned the task of ensuring financial stability. Moreover, after the great financial crisis, a credible and effective resolution framework to resolve failing banks in an orderly manner has been a key innovation to increase trust, protect taxpayers’ money and preserve financial stability.
Data on European banks refer to significant institutions under the direct supervision of the ECB. Please see the latest list of supervised entities as well as the latest available supervisory data that refer to the second quarter of 2025.
As of the second quarter of 2025, the liquidity coverage ratio stood at 157.8% and the net stable funding ratio at 126.7%.
In the second quarter of 2015, the comparable number was 7.5%. These ratios include cash balances at central banks and other demand deposits. The NPL ratio excluding cash balances at central banks and other demand deposits stood at 2.2% as of the second quarter of 2025.
Elderson, F. (2024), “The first decade of European supervision: taking stock and looking ahead”, keynote speech at the “10 Years of SSM – Looking back and looking forward” conference organised by the European Banking Institute and the Hessisches Ministerium für Wissenschaft und Kunst, Frankfurt am Main, 4 November; Elderson, F. (2024), “The art of bending without breaking – banking on operational resilience”, speech at the joint European Banking Authority and European Central Bank international conference on “Addressing supervisory challenges through enhanced collaboration”, Frankfurt am Main, 4 September; and Tuominen, A. (2025), “Operational resilience in the digital age”, The Supervision Blog, ECB, 17 January.
For why a broader view on resilience, including governance and risk culture, operational resilience and structural risk drivers are not peripheral issues but are at the core of prudential supervision, see Elderson, F. (2025), “What good supervision looks like”, keynote speech at the 24th Annual International Conference on Policy Challenges for the Financial Sector, Washington DC, 12 June; and Elderson, F. (2025), “Resilience offers a competitive advantage, especially in uncertain times”, keynote speech at the Morgan Stanley European Financials Conference, London, 19 March.
Boissey, F. et al. (2019), “Impact of financial regulations: insights from an online repository of studies”, BIS Quarterly Review, 5 March; Budnik, K., Dimitrov, I., Gross, J., Lampe, M. and Volk, M. (2021), “Macroeconomic impact of Basel III finalisation on the euro area”, Macroprudential Bulletin, No 14, ECB, July. See also Siciliani, P., Eccles, P., Netto, F., Vitello, E., Sivanathan, V. and van Hasselt, I. (2023), Paper 2: The links between prudential regulation, competitiveness and growth, Bank of England Prudential Regulation Authority, 11 September. On the usability of buffers for bank lending, see Couaillier, C. et al. (2021), “Bank capital buffers and lending in the euro area during the pandemic”, Financial Stability Review, November; and Couaillier, C. et al. (2022), “Caution: do not cross! Capital buffers and lending in Covid-19 times”, Working Paper Series, No 2644, ECB, February.
See Berg, J., Boivin, N. and Geeroms, H. (2025), “The quickly fading memory of why and when bank capital is important”, Working Papers, Issue 4, Bruegel; and Behn, M. and Reghezza, A. (2025), “Capital requirements: a pillar or a burden for bank competitiveness?”, Occasional Paper Series, No 376, ECB.
In relation to the significant growth of non-bank financial institutions that now accounts for over half of financial sector assets in the euro area, see Buch, C. (2025): “Hidden leverage and blind spots: addressing banks’ exposures to private market funds”, The Supervision Blog, ECB, 3 June; and Montagner, P. (2025), “Non-bank financial institutions: understanding transmission channels and regulatory challenges”, contribution for Eurofi Magazine, 17 September.
For example, the number of significant cyber incidents reported to the ECB more than doubled between 2022 and 2024.
Banks will be informed of their SREP outcome, key concerns and requirements/recommendations in a concise letter, with the main text expected to be around ten pages on average.
Buch, C. (2025), “Simplification without deregulation: European supervision, regulation and reporting in a changing environment”, speech at the Goldman Sachs European Financials Conference 2025, Berlin, 11 June; ECB, “Making European supervision more efficient, effective and risk-focused”; Donnery, S. (2025), “As simple as possible, but not simpler”, The Supervision Blog, ECB, 8 September.
For example, we reduced the average processing time from 109 days in 2023 to 97 days in 2024, and to as little as 61 days for non-complex cases, meaning that we can dedicate more time and resources to complex cases in line with our risk-based approach. For certain appointments, such as renewals of mandates, we will streamline the assessment process further.
Today, around 1,400 banks, or more than 70% of less significant institutions, are also SNCIs.
Buch, C. (2025), “Simplification without deregulation: European supervision, regulation and reporting in a changing environment”, speech at the Goldman Sachs European Financials Conference 2025, Berlin, 11 June.
Di Vito, L., Martín Fuentes, N. and Matos Leite, J. (2023), “Understanding the profitability gap between euro area and US global systemically important banks”, Occasional Paper Series, No 327, ECB, August.
Draghi, M. (2024), The future of European competitiveness, European Commission, September.
Donnery, S. (2025), “Less regulation, more growth? It’s not that simple”, speech at the SSM Senior Forum organised by A&O Shearman, Königstein im Taunus, 25 June.
Schnabel, I. (2024), “From laggard to leader? Closing the euro area’s technology gap”, inaugural lecture of the EMU Lab at the European University Institute, Florence, 16 February.
Elderson, F. (2025), “Europe at a crossroads: it is high time to complete the Single Market” , keynote speech at the SRB Legal Conference 2025, Brussels, 18 June.

 
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As carbon pricing continues to expand across countries and sectors as part of broader carbon mitigation efforts, design choices are increasingly diverse and flexible to reflect a variety of policy objectives including reducing emissions, raising public revenue, and strengthening energy affordability, energy security, and competitiveness, according to a new OECD report.
Effective Carbon Rates 2025: Recent trends in taxes on energy use and carbon pricing presents information on how countries are using carbon taxes, emissions trading systems (ETS) and fuel excise taxes.
Covering 79 countries that together account for 82% of global greenhouse gas emissions, this edition provides detailed and comprehensive 2023 data, with selected updates through 2025, and places a particular focus on ETSs.
The share of greenhouse gas emissions subject to a carbon tax or covered by an ETS reached almost 27% in 2023, up from 15% in 2018, across the 79 countries analysed in the report. Carbon taxes and emissions trading systems are now in place in over 50 countries. Since 2023, carbon pricing instruments have been introduced or are being considered in a dozen countries in Asia, Europe and Latin America and the Caribbean.
Changes in coverage are mostly driven by ETSs: coverage of emissions by carbon taxes remained stable between 2018 and 2023, at around 5%, while coverage by ETSs more than doubled, from 10% to 22%. The expansion of the Chinese national ETS to the aluminium, cement and steel sectors could further increase ETS coverage to 29% in 2025.
Sector coverage is increasing. ETSs are the main carbon pricing instrument used in the electricity and industry sectors, which together account for about two thirds of emissions. These systems are currently extending either to sectors historically covered by fuel excise and carbon taxes (such as buildings, transport), or to new sectors including international maritime transport.
ETS design is evolving. Many systems now set targets based on the carbon intensity of production, creating flexibility for fluctuations in production, instead of setting a fixed emissions cap as in cap-and-trade systems. In 2018, only two in 20 ETSs were intensity-based; by 2023, 12 out of 34 were, and these now account for 70% of emissions covered by ETSs. Similarly, accounting for current production levels in free allowance allocation methods has become more common, even in cap-and-trade systems.
For more information on the OECD’s work on effective carbon rates, visit https://www.oecd.org/en/topics/policy-issues/tax-and-the-environment.html. This link, and the above link to the report Effective Carbon Rates 2025, can be used in media articles.
For further information, journalists are invited to contact Elisabeth Schoeffmann at the OECD Media Office  (+33 1 45 24 97 00).
Working with over 100 countries, the OECD is a global policy forum that promotes policies to preserve individual liberty and improve the economic and social well-being of people around the world.
 
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Speech by Governor Michael S. Barr
Thank you for the opportunity to speak to you today.1 It is an honor and a pleasure to be here with you in Singapore, a crossroads for global trade and finance, to discuss the transformational nature of artificial intelligence (AI). Like other central banks around the world, including the Monetary Authority of Singapore, we at the Federal Reserve have been exploring the use of AI in our operations for quite some time as well as considering the implications of AI’s adoption for the financial sector and the broader economy.
At the Fed, we’ve been interested in the effects of AI on the economy and its role in the financial system for decades. Remarkably, in 1997, Governor Susan Phillips delivered a speech noting the use of AI in consumer loan underwriting.2 In the past year, no fewer than seven speeches by Fed Governors have had “AI” in the title.
Today I’ll discuss the opportunities presented by AI relevant for central bankers as well as the risks it may pose that policymakers should consider. I will leave you with three main takeaways.
The State of AI Innovation and Deployment
My first main point is that while AI is a big deal that will transform economies, there are a range of outcomes for how it could do so.
AI—algorithms that mimic human thought, communication, and choices—has been with us for decades, but AI entered a new era with the launch of ChatGPT in late 2022. Generative AI (GenAI) captured our imagination with convincing conversations in which it is possible to go deep on a wide range of topics. Earlier forms of AI were often the bailiwick of digitally native companies, but GenAI is spreading rapidly through the economy. As of 2024, three in four large companies were using GenAI, though some report it has yet to improve their bottom line.3 Smaller companies have been slower to adopt GenAI, with adoption rates reported in the high single digits, albeit with a high degree of heterogeneity among sectors. Also, one could surmise, based on other surveys of individuals, that work-related use is more widespread among employees than their CEOs realize.4
A recent survey by the Federal Reserve Bank of New York showed that firms plan to retrain their workforces to take advantage of AI to enhance productivity, with widespread layoffs limited.5 But survey respondents also report that AI has led firms to scale back hiring, a development that may be contributing to the recent low levels of job creation in the U.S. economy, a concern for many workers and particularly for newer entrants to the job market.
Taking a step back, as I have noted in the past, I see two basic scenarios for how AI can transform the economy.6 In the first scenario, there is incremental adoption of GenAI that augments existing tasks and jobs. In the second scenario, a revolution occurs. GenAI transforms the nature of work and leisure, boosting the efficiency of research and development, remaking industries, and creating firms with new—perhaps radically new—business models.
Right now, it is difficult to predict which scenario (or perhaps one or more intermediate scenarios) will come to pass.
We can already see incremental change as GenAI is increasingly integrated with standard workplace software. With its natural language interface, GenAI is inherently user friendly, so few workers need special skills or unusually onerous training to use it. At the same time, some start-ups have a more revolutionary flavor because they are centered on AI from the outset. One indicator of how the labor market is evolving toward deeper integration with AI is the skills mentioned in job postings. While overall the share of job listings that mention AI-related skills is small—about 5 percent—in the information sector, it is about 20 percent. The financial sector, where firms are always looking for a technological edge, is not far behind, with 1 in 10 job postings mentioning AI.7 So we can see that the skills needed in some key sectors are already changing. The speed of that change is likely to increase. If the AI changes happen gradually, workers and firms will have time to adjust, but if they happen rapidly, there may be significant dislocations in the short term.
A massive wave of data center investment has begun, pointing to signs of confidence among leading AI companies that the use of AI at scale throughout the economy is just around the corner. If they’re right and AI is useful enough to keep what is currently projected to be $3 trillion of new data center capacity utilized effectively, we can expect significant changes in economies. Investment in capital generally raises labor productivity and offers the potential for higher output growth without pressure on inflation over the longer term. As I have discussed in previous remarks, if these changes are significant, they can also affect the conduct of monetary policy.8 Of course, it may be the case instead that investment exceeds short-term demand, in which case there may be losses and adjustments to the AI sector.
AI and the Financial Sector
The second key point I would like to make is that the financial sector is adopting AI quickly, and while there are many benefits to this adoption, the risks will need to be managed carefully.
So far, AI adoption in the financial sector appears to be most concentrated in areas that can enhance operational efficiency, including applications that involve text analysis, classification, and information search inside the firm, as well as customer-facing functions. These incremental improvements to common business functions are a key reason to be hopeful about AI raising labor productivity in that sector.
At the same time, there is significant investment in experimentation with AI for core functions for financial services. Data-driven financial-sector-specific tasks, including credit decision support, fraud detection, and trading are using AI-specific tools. Ensuring that AI is used appropriately for these functions faces appreciable challenges.
First, the amount of organizational change needed by financial services firms to utilize GenAI may be substantial. History suggests progress may be slow. Adoption of machine learning, an AI technology that preceded GenAI, was concentrated in firms that were highly digitized from their founding—and even in those cases, adoption was a long process.9 Fintech firms organized to exploit AI from their founding can play a key role in driving efficiency forward in the sector, providing services to the incumbent firms.10 But productivity may even decrease in the short term, as heavy investments in business-process improvements take time to play out to productivity gains.
A second challenge is the practical constraints of rushing into AI for core business activities in the financial sector, as firms need to ensure that the resulting processes and outcomes are consistent with relevant laws and appropriate risk management. Large institutions are exploring the use of GenAI, including agentic AI, in their financial models—but doing so requires care. To successfully leverage the potential of GenAI on a sustainable basis, decisions based on those models must be well controlled, numerically and legally precise, explainable, and replicable. AI developers still struggle to some extent with all of those criteria. We need to reduce the risk that AI reinforces biases in consumer lending. And we also need to guard against the risks that could result from the use of AI in financial markets. For example, profit maximization by AI-powered trading algorithms may result in tacit collusion, market manipulation, or trading strategies that result in significant market volatility or even systemic risk.11
We will need innovation that is responsive to these risks to see additional advances in the use of AI for a broad array of core financial services functions.
AI and Central Banking
A third and final point I would like to leave you with is that central banks, including the Fed, need to keep up with AI by increasing our speed of adoption for our own operations.
The nature of central banking work is inherently careful, considered, and measured when evaluating anything new. This is particularly true for any new technologies.12 But it seems clear already that the many advantages offered by AI could assist central banks in at least some of their operations, and the speed at which this technology is moving makes it appropriate to proactively engage in using AI for our own operations. That is why the Federal Reserve is using AI, where appropriate, to increase staff efficiency and effectiveness. My view is that GenAI is a transformative technology that central banks need to remain engaged with to ensure an ability to execute as technology evolves.
As we push ahead on efficiency gains, it is important that we leverage the right tools for the task at hand, recognizing that GenAI is not always the best choice. Some of the challenges that we face can be addressed by robotic process automation or traditional AI methods. These are the same kinds of questions that every business and organization considering AI should be weighing.
At the Federal Reserve, we have focused on ensuring we can leverage AI capabilities by establishing an AI program and governance framework for the use of AI technologies.13 We are taking an enterprise-wide approach of learning-by-doing and broadly adopting high-value uses of GenAI, such as writing, coding, and research activities. We have taken a “hands on keys” approach to having staff engage with it. We are identifying the business processes that can be improved and transformed with the technology.
One internal application of GenAI I am particularly excited about that helps us achieve all these goals is technology modernization. We are applying GenAI-enabled tools within clear guardrails to translate legacy code, generate unit tests, and accelerate cloud migration. So far, the result of this usage is faster delivery, improved quality, and enhanced developer experience. And it will likely mean better outcomes in support of the American people.
Given AI’s current and prospective role in economic activity, we are devoting the necessary resources to understanding it, including by analyzing not only AI’s economic and financial implications, but also exploring how AI can enhance our financial stability work, strengthen supervisory and regulatory capabilities, and ensure the smooth functioning of our payment systems.
These are just some of the ways that the Fed, like other organizations, is using AI to make us more productive and capable. These efforts may also help us understand the effect of AI on the economy, the banking system, and the payment system. That task will be a major job for central banks in the years ahead. AI has the potential to fundamentally change the economy and society. And as central bankers, we need to keep up.
Thank you.
 
1. The views expressed here are my own and are not necessarily those of my colleagues on the Federal Reserve Board or the Federal Open Market Committee. Return to text
2. See Susan M. Phillips (1997), “Risk Management,” speech delivered at the Asset/Liability and Treasury Management Conference of the Bank Administration Institute, Chicago, November 4. Return to text
3. See Aditya Challapally, Chris Pease, Ramesh Raskar, and Pradyumna Chari (2025), “The GenAI Divide: State of AI in Business 2025,” MIT NANDA Report, July, https://mlq.ai/media/quarterly_decks/v0.1_State_of_AI_in_Business_2025_Report.pdf. There are a range additional surveys with various results; see, for example, Richard Horton, Jan Michalski, Stacey Winters, Douglas Gunn, and Jennifer Holland (2025), “AI ROI: The Paradox of Rising Investment and Elusive Returns,” October 22, https://www.deloitte.com/uk/en/issues/generative-ai/ai-roi-the-paradox-of-rising-investment-and-elusive-returns.html. Return to text
4. On adoption by large firms, see McKinsey & Company (2025), “The State of AI: Agents, Innovation, and Transformation,” November 5, https://www.mckinsey.com/capabilities/quantumblack/our-insights/the-state-of-ai. On adoption by smaller firms, see the Business Trends and Outlook Survey from the U.S. Census Bureau, which is available on its website at https://www.census.gov/programs-surveys/btos.html. On adoption by individuals, see Alexander Bick, Adam Blandin, and David J. Deming (2024), “The Rapid Adoption of Generative AI,” Working Paper Series 32966 (Cambridge, Mass.: National Bureau of Economic Research, September; revised February 2025). Return to text
5. See Ben Hyman, Jaison R. Abel, Natalia Emanuel, Nick Montalbano, and Richard Deitz (2025), “Are Businesses Scaling Back Hiring Due to AI?” Federal Reserve Bank of New York, Liberty Street Economics (blog), September 4. Other surveys have shown similar results; see, for example, Jeremy Korst, Stefano Puntoni, and Prasanna Tambe (2025), “Accountable Acceleration: Gen AI Fast-Tracks Into the Enterprise (PDF),” 2025 Report, October 29. Return to text
6. See Michael S. Barr (2025), “Artificial Intelligence: Hypothetical Scenarios for the Future,” speech delivered at the Council on Foreign Relations, New York, February 18. Return to text
7. Job-posting statistics are based on the classification by Lightcast and are calculated using the methodology developed in Daron Acemoglu, David Autor, Jonathon Hazell, and Pascual Restrepo, “Artificial Intelligence and Jobs: Evidence from Online Vacancies,” Journal of Labor Economics, vol. 40 (April), pp. S293–340. Data are available by subscription from Lightcast at https://lightcast.io. Return to text
8. See Michael S. Barr (2025), “Artificial Intelligence and the Labor Market: A Scenario-Based Approach,” speech delivered at the Reykjavík Economic Conference 2025, Central Bank of Iceland, Reykjavík, Iceland, May 9. Return to text
9. See Timothy Bresnahan (2024), “What Innovation Paths for AI to Become a GPT?” Journal of Economics & Management Strategy, vol. 33 (Summer), pp. 305–16. Return to text
10. See Michael S. Barr (2025), “AI, Fintechs, and Banks,” speech delivered at the Federal Reserve Bank of San Francisco, San Francisco, April 4. Return to text
11. The most recent Financial Stability Report is available on the Federal Reserve Board’s website at https://www.federalreserve.gov/publications/files/financial-stability-report-20251107.pdf. Return to text
12. A report from the Bank of International Settlements notes that central bankers have the prospect of improving data quality, enhancing operations, and improving decisionmaking with the use of AI and provides a framework for considering questions of governance and risk management when doing so; see Bank of International Settlements (2025), “Governance of AI Adoption at Central Banks (PDF),” January. Return to text
13. See the “Board of Governors of the Federal Reserve System Compliance Plan for OMB Memorandum M-25-21,” which is available on the Federal Reserve’s website at https://www.federalreserve.gov/publications/compliance-plan-for-OMB-memorandum-m-25-21.htm.
 
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The Council and the European Parliament reached a provisional deal on a regulation concerning new rules aimed at combating cross-border unfair trading practices in the agricultural and food supply chain.
This regulation aims to improve cooperation between EU authorities responsible for enforcing rules on unfair trading practices in the agricultural and food supply chain. It is part of the EU’s efforts to support farmers’ position in the supply chain.
“I am happy that we have reached a compromise with the European Parliament on the proposal on unfair trading practices in the food supply chain in relation to the cooperation between member state authorities. This does not change the directive on unfair trading practices, but this compromise will ensure a smoother cooperation across member states on enforcement, without adding unnecessary bureaucracy for the agri-food sector.”

Jacob Jensen, Danish Minister for Food, Agriculture and Fisheries

Main elements of the agreement
The agreement sets up a comprehensive set of rules for cross-border cooperation against unfair trading practices in business-to-business relationships within the agricultural and food supply chain. It improves transnational cooperation in cases where suppliers and buyers are located in different member states.
The regulation introduces a mutual assistance mechanism, which would enable national enforcement authorities to ask for and exchange information or to collaborate on investigations related to unfair trading practices. It will also allow them to coordinate enforcement actions and notify other member states about decisions related to unfair trading practices.
Furthermore, the new piece of legislation introduces rules on the covering of costs in cases of mutual assistance, on data protection and confidentiality of information to ensure that suppliers remain safe from retaliation.
The legislation also establishes a mechanism for coordinated action in cases of large-scale cross-border unfair trading practices involving at least three EU countries. In such cases, a member state would be designated to coordinate the response.
The regulation contains rules for cooperation between member states in cases of unfair trading practices by buyers from outside the EU, in order to better protect European farmers.
Next steps
The provisional agreement will now be endorsed by the Council and the Parliament, before being formally adopted.
Background
In 2019, the directive on combating unfair trading practices entered into force with the aim of addressing imbalances in bargaining power between suppliers and buyers of agricultural products. In particular, its goal is to protect farmers who, for instance, sell their products to large supermarkets and food processing companies.
Based on the experience gained since then, the Commission considered that the cross-border dimension of unfair trading practices needed to be addressed. In fact, on average, around 20% of agricultural and food products consumed in an EU member state come from another member state.
The Commission published its proposal in December 2024, as part of the EU’s efforts to improve farmers’ position in the agrifood supply chain. The proposed rules also directly reflect several recommendations of the strategic dialogue on the future of EU agriculture and respond to some of the most pressing challenges that the agricultural sector faces.
 
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