The European Commission has said it will review the regulatory treatment of trade finance as part of a planned legislation drive to make European banks more globally competitive and free up lending for the bloc’s businesses.
The policymaking body launched a consultation last year seeking feedback on how it could help the banking sector remain competitive with countries that have looser capital rules, such as the UK and US.
In response to the consultation, the Commission said on July 17 it will “evaluate the regulatory treatment of strategic investments through specialised lending, including project finance for infrastructures and the energy transition, as well as the regulatory treatment of trade finance with a view to ensuring that European banks can support European companies and strengthen supply-chain security”.
The review of trade finance regulation is a small part of a much broader assessment of banking rules in the EU. Potential reforms identified by the Commission include trimming red tape on cross-border banking groups, tweaking the bloc’s deposit protection scheme, and “re-assessing” how the EU has adopted international standards and prudential policies.
The Commission said it would invite further feedback and release a “package of measures” in the first quarter of 2027.
Spokespeople for the Commission did not provide further details about possible changes to regulation covering trade finance when asked by GTR, but industry groups have called on regulators to scrap wording in the bloc’s Capital Requirements Regulation that defines trade instruments as having a maturity of “generally less than one year”.
Trade associations have argued that removing the maturity cap would lower capital requirements on widely used trade finance instruments such as guarantees, performance bonds and standby letters of credit, which are often issued with longer maturities.
A summary of consultation responses published by the Commission last week noted that some stakeholders had suggested “specific technical reforms” to trade finance rules. Respondents also pointed out that large corporates “face specific constraints in specialised lending, trade finance and cross-border capital-intensive projects”, the summary said.
EU banks have “developed good expertise and experience in controlling the inherent riskiness of their exposures” which has not been recognised in the regulatory framework, a third Commission document said, pointing to International Chamber of Commerce data that shows low default rates for trade and export finance exposures.
EU policymakers have come under pressure to re-think the bloc’s implementation of the Basel 4 capital framework after the UK and US unveiled more flexible interpretations of the global regulatory capital standards.
“Deviations and delays in implementing agreed international standards in some major jurisdictions have increased concerns regarding EU banks’ competitiveness in global markets,” the Commission said.
“To address severe competitive imbalances prompted by third-country jurisdictions failing to meet international standards, the Commission will continue to closely monitor the international situation and make use of the available regulatory tools, while safeguarding financial stability.”
On trade finance, the EU has already deviated from the Basel text by abandoning the proposed adoption of much tougher capital rules on off-balance sheet instruments.
Industry groups have also called for more favourable capital benefits from banks’ use of credit insurance, which has dipped since rules were changed in 2025, and for more consistent application of a new branch requirement for third-country lenders.
