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Banking around the world · Europe

Europe

Where global banking rules are written: a banking union, a single rulebook and instant euro payments by law

Europe's edition covers the 27 member states of the European Union. The EBA's single rulebook applies in all of them. Twenty-one use the euro and form the banking union, where the ECB directly supervises the largest banks. AMLA, ESMA and the EDPB complete the picture for financial crime, markets and data. Germany and France have their own market cards. The UK, Switzerland, Norway and Iceland are now in our UK & wider Europe edition.

Ten cases to test your understandingCompare the regions
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At a glance

21 countriesuse the euro in 2026, after Bulgaria joined on 1 January
EUR 100,000EU deposit cover per depositor per bank (2026)
110banks directly supervised by the ECB (list of August 2026)
9 Oct 2025euro-area banks must send instant payments with a payee name check
Europe

The markets

EU

European Union / euro area

Euro (EUR), used by 21 of 27 EU countries (2026) · Frankfurt · Paris · Amsterdam · Luxembourg · Dublin · Milan · Madrid

Central bank
European Central Bank with the national central banks (the Eurosystem): euro monetary policy and the T2, TIPS and T2S settlement services.
Supervisors
ECB Banking Supervision (SSM) with national authorities; Single Resolution Board; EBA single rulebook; ESMA for markets and crypto-assets; AMLA (direct AML supervision from 2028); EDPB for data protection.
Payment rails
SEPA credit transfers and SEPA Instant (24/7, with Verification of Payee since October 2025); TIPS and T2; cards; the Wero wallet.
Open finance
PSD2 open banking via bank APIs since 2019; PSD3 and the Payment Services Regulation are agreed but await formal adoption (Parliament vote indicated for December 2026); FiDA open finance still under negotiation.
Deposit protection
National schemes harmonised by EU law: EUR 100,000 per depositor per bank; some temporary high balances covered above that.
Digital banks
No separate digital licence: the ECB grants all euro-area bank licences. Examples: N26 and Trade Republic (Germany), bunq (Netherlands), Revolut (Lithuanian licence).
Islamic finance
No separate EU regime: an Islamic bank needs the same ECB licence and meets the same capital rules as any bank. Luxembourg issued a EUR 200m sovereign sukuk (2014) and is a common sukuk listing venue; Germany hosts the euro area's first Islamic bank.
DE

Germany

Euro (EUR) · Frankfurt · Munich · Düsseldorf · Hamburg · Berlin · Stuttgart

Central bank
Deutsche Bundesbank, part of the Eurosystem: shares banking supervision with BaFin, monitors banks day to day and carries out on-site inspections; represents Germany in the EBA and the Basel Committee.
Supervisors
ECB (SSM) for significant banks and all bank licences; BaFin, with the Bundesbank, for less significant banks, payment and e-money firms, leasing and factoring; FIU Germany for suspicious transaction reports. AMLA is based in Frankfurt.
Payment rails
SEPA credit transfers and SEPA Instant, with T2 and TIPS for settlement in central bank money; girocard debit cards; Wero for person-to-person and online payments, with in-store payments to follow.
Open finance
PSD2 is written into German law: banks give licensed third parties API access to payment accounts with the customer's consent.
Deposit protection
EUR 100,000 per depositor per bank: private banks through the statutory scheme (EdB), savings and cooperative banks through their own institutional protection schemes; many private banks add a voluntary deposit protection fund.
Digital banks
No separate digital licence: the ECB grants full banking licences on BaFin's proposal. Examples: N26 and Trade Republic.
Islamic finance
KT Bank AG in Frankfurt, a Kuveyt Türk subsidiary, is the euro area's first Islamic bank (licensed 2015): interest-free accounts, savings, and property and vehicle finance. Saxony-Anhalt issued a sukuk in 2004.
FR

France

Euro (EUR) · Paris · La Défense · Lyon · Strasbourg

Central bank
Banque de France, part of the Eurosystem: monetary operations, financial stability, oversight of payments, and public services such as over-indebtedness procedures and the right to a bank account.
Supervisors
ECB (SSM) for significant banks and all bank licences; ACPR, backed by the Banque de France, for prudential supervision, resolution, AML and customer protection (657 banking institutions); AMF for markets; TRACFIN as the FIU.
Payment rails
SEPA credit transfers and SEPA Instant; CB (Cartes Bancaires), the national card scheme; Wero for person-to-person and online payments, with in-store payments to follow.
Open finance
PSD2 is written into French law: banks give licensed third parties API access to payment accounts with the customer's consent.
Deposit protection
FGDR: EUR 100,000 per customer per bank, paid within seven working days; Livret A, LDDS and LEP regulated savings have a separate State-guaranteed ceiling of EUR 100,000.
Digital banks
No separate digital licence. BoursoBank (formerly Boursorama) is a fully online bank with more than 9 million clients; the ACPR authorises payment and e-money firms.
Islamic finance
No Islamic bank operates yet. The tax administration has issued guidance on Islamic financing instruments, a starting point for future products.

How banking is organised

One rulebook, several layers. The EBA's single rulebook applies in all 27 member states. In the 21 euro countries the banking union places the largest banks under direct ECB supervision and a single resolution regime, while national authorities such as BaFin and the ACPR supervise smaller banks. The six EU states outside the euro keep their own central banks and supervisors.

  • Single Supervisory Mechanism: the ECB directly supervises 110 significant banks (list of August 2026); national supervisors cover the rest under ECB oversight.
  • The Single Resolution Board plans for failing banks, backed by a Single Resolution Fund; the EBA writes the single rulebook used across all 27 EU states.
  • Germany's three pillars (private banks, public savings banks and cooperative banks) shape the market; the Bundesbank and BaFin share supervision of the smaller banks.
  • France: large universal and mutual banking groups lead the market; the ACPR supervises 657 banking institutions and also handles resolution and customer protection.
  • Sweden, Denmark, Poland, Czechia, Hungary and Romania keep their own currencies and supervisors but apply the same EU rules; they can join the banking union through close cooperation with the ECB.

Payments: instant by law

The EU made instant euro payments a universal service: since October 2025 euro-area providers must send and receive SEPA Instant around the clock, check the payee's name and charge no more than for a standard transfer. European wallets and a possible digital euro aim to give Europe more payment rails of its own.

  • Euro area: T2 settles large payments and TIPS settles instant payments in central bank money; providers in EU states outside the euro follow in 2027. The ECB is also studying a link from TIPS to Nexus, a network joining national instant payment systems.
  • Payee checks: Verification of Payee, mandatory in the euro area since October 2025, warns of a name mismatch before the payer authorises; the UK has run a similar check since 2020.
  • Wallets and schemes: EPI's Wero runs in Belgium, France and Germany for person-to-person and online payments; national schemes such as France's CB and Spain's Bizum stay widely used.
  • Digital euro: the Council agreed its position in December 2025; Parliament's ECON committee voted in June 2026 and talks with the Council were approved in July 2026. The ECB plans a pilot in 2027 and possible first issuance in 2029 if the law passes.
  • Open banking: PSD2 interfaces across the EU; PSD3 and the Payment Services Regulation are agreed but await formal adoption, with a Parliament vote indicated for December 2026.

Fintech, digital banks and crypto rules

The EU has produced some of the world's largest digital banks and payment firms. There is no lighter digital-bank licence: challengers hold the same banking, e-money or payment licences as incumbents, and an EU licence passports across the European Economic Area. MiCA gives the EU one regime for crypto-assets and stablecoins.

  • Full-licence digital banks: N26 and Trade Republic (Germany), bunq (Netherlands), Revolut (Lithuanian licence) and BoursoBank (France, more than 9 million clients).
  • Payments leaders such as Adyen (Netherlands), Klarna (Sweden), Worldline (France) and Nexi (Italy) serve merchants across Europe and beyond.
  • MiCA has applied in full since 30 December 2024; transitional periods for existing crypto-asset firms ended by 1 July 2026.
  • Big tech: EU competition commitments (2024) opened iPhone contactless payments to third-party wallets, giving banks a route to their own tap-to-pay.
  • Passporting: a licence from one member state lets a firm serve the whole EEA. UK firms lost this right after Brexit, which is why many now run subsidiaries inside the EU.

The rulebook a bank must map

A bank here maps prudential, conduct, resilience and financial-crime rules from two layers: EU regulations that apply directly, and directives written into national law, such as Germany's Banking Act or France's Monetary and Financial Code. Basel III final has applied since January 2025; its market-risk rules follow in January 2027 with temporary relief. Operational resilience is now hard law, not guidance.

  • EU: CRR3/CRD6 capital rules, BRRD and SRMR for resolution, the deposit guarantee directive, PSD2 (moving to PSD3/PSR), MiCA and GDPR; the new Consumer Credit Directive applies from 20 November 2026.
  • DORA has applied since 17 January 2025: ICT risk, incident reporting, resilience testing and third-party registers; critical ICT providers were designated in November 2025.
  • Financial crime and AI: the EU AML Regulation applies from July 2027; from 2028 AMLA, based in Frankfurt, directly supervises up to 40 high-risk groups active in at least six member states. AI Act duties for credit scoring apply from December 2027.
  • Germany: the Banking Act (KWG), BaFin's minimum requirements for risk management (MaRisk), the Money Laundering Act (GwG) and the Federal Data Protection Act alongside GDPR.
  • France: the Monetary and Financial Code, ACPR and AMF rules, suspicious-transaction reports to TRACFIN, and the CNIL enforcing GDPR.

What operations teams wrestle with

Fraud has shifted from stolen cards to scams in which customers authorise the payment themselves, so operations teams now check payee names, hold suspicious payments and prepare for wider refund duties. They must also prove resilience, mapping third parties, testing scenarios and reporting incidents within hours, while running legacy cores across languages and borders.

  • Scam losses: the new Payment Services Regulation, still awaiting formal adoption, is expected to widen fraud-refund duties; for comparison, the UK has split APP-scam refunds between sending and receiving firms since 2024.
  • Instant payments leave no recall window: EU rules require daily sanctions screening of customers rather than per-payment checks, and fraud scoring must run in seconds.
  • Resilience evidence: DORA registers of ICT contracts, major-incident reports and threat-led penetration testing for larger firms, plus EBA outsourcing guidelines.
  • Cross-border KYC: national ID and address systems differ; every member state must offer an EU digital identity wallet by the end of 2026, banks will have to accept it, and one EU AML rulebook applies from 2027.
  • Legacy and change: mainframe cores, post-merger integration and cloud migration, all under direct supervisory scrutiny of outsourcing and exit plans.

How SMEs get financed

Bank lending remains the main source of SME finance in the EU, supported by public guarantees and development banks. EU programmes flow through the EIB Group and national promotional banks such as KfW in Germany and Bpifrance in France, usually via the firm's own bank. Platforms, leasing and invoice finance fill gaps.

  • EU: EIB Group (EIB and EIF) and InvestEU guarantees reach firms through local banks; national promotional banks include KfW, Bpifrance, ICO and CDP.
  • Germany: KfW, acting for the federal government and the states, provided EUR 112.8 billion of funding in 2024; firms usually apply for its SME loans through their own bank.
  • France: Bpifrance offers loans, guarantees on bank loans, equity and export credit insurance through 50 regional branches.
  • France: the Banque de France offers credit mediation for firms refused a loan, plus a company rating indicator and financial diagnostics.
  • Crowdfunding platforms operate EU-wide under one licence (since 2021); leasing and invoice finance are widely used by small firms.
Islamic finance: an eye opener

Islamic finance in Europe

Islamic finance in the EU works inside ordinary banking law: Islamic banks hold the same licences and meet the same capital rules as any bank. Germany has a licensed Islamic bank, Saxony-Anhalt and Luxembourg have issued sukuk, and French tax guidance covers Islamic instruments. The UK, covered in our UK & wider Europe edition, has Europe's most developed market.

  • Germany's KT Bank AG opened in Frankfurt in 2015 as the euro area's first Islamic bank; a Kuveyt Türk subsidiary, it offers interest-free accounts, savings, and property and vehicle finance.
  • Sukuk: Saxony-Anhalt issued one in 2004, and Luxembourg's EUR 200m sovereign sukuk of 2014 was backed by state buildings; Luxembourg is also a common listing venue for sukuk.
  • No separate EU regime: an Islamic bank needs an ECB licence and meets the same capital and liquidity rules as any bank, so product structures must fit standard EU rules.
  • France has no Islamic bank, but its tax administration has issued guidance on Islamic instruments, giving banks and investors a starting point.

What it offers everyone

Customers

Price and terms are agreed and disclosed up front, financing is tied to a real home, vehicle or machine, and late-payment charges go to charity rather than profit. Families and firms who avoid interest can buy, build and trade through a regulated bank.

Banks and financiers

A loyal customer base that conventional products do not reach; asset-backed structures that keep financing close to real activity; and access to sukuk markets and Gulf investors. Profit-sharing accounts align the bank's results with its depositors'.

Savers and investors

Returns come from trade, leasing and shared profit in identifiable assets, not from lending money on money. Ethical screening excludes harmful sectors, and sukuk give holders a clear link to the assets and cash flows behind them.

The economy

Finance grows in step with real trade and investment rather than debt traded on debt; limits on excessive speculation support discipline; sukuk can fund infrastructure and housing; and savers who stayed outside banks join the financial system.

A concrete opening: Asset-backed home and SME finance for EU households and family firms who avoid interest, funded by sukuk and offered under the same prudential rules as any bank. KT Bank's more than ten years in Frankfurt show it can work inside the banking union.

Working with banking teams here

Working with banking teams in Europe

Common norms; individuals differ. Meetings usually start on time with a written agenda, decisions follow documented evidence and formal sign-off, and regulatory expectations are quoted precisely. Teams are multilingual and styles vary: often direct in the Netherlands and Germany, more formal in France, consensus-seeking in the Nordic countries.

Common norms; individuals differ.

  • Send papers in advance: many committees decide only on documents circulated before the meeting, and minutes matter.
  • In Germany and several other countries, works councils have a say in workplace changes; build consultation time into transformation plans.
  • Long summer leave in July and August slows decisions; plan workshops and sign-offs around it.
  • Data protection is cultural as well as legal: expect questions on GDPR, data location and consent before any demonstration.
  • English is the working language in most international banks; a few words of French, German, Italian or Spanish build goodwill with local teams.
Learning from each other

What the GCC can learn from Europe

  • Legislating instant payments as a universal service, with free payee-name checks and prices no higher than standard transfers.
  • Operational resilience as hard law: incident reporting, third-party registers and direct oversight of critical cloud and ICT providers.
  • One supervisor for the largest banks across 21 countries, with a common method for reviewing capital, risk and governance.

What Europe can learn from the GCC

  • Islamic finance at scale: asset-backed retail and SME financing, Shariah governance standards and sukuk that fund real infrastructure.
  • Fast digital onboarding through national digital identity, cutting KYC time for customers and banks alike.
  • Sandbox-to-licence paths and quick adoption of national instant payment rails by young, mobile-first populations.
The World tour · Europe

Ten cases from Europe

Decide as bankers there decide: +1 if right, −1 if wrong, and every answer explained. Your score counts on the open MTWAFIQ Future Leaders board.

CultureCustomersDigital banksMarketsOpen financeOperationsPaymentsRegulationRisk and complianceSME and corporate
Ten cases to test your understanding
The other regions
GCCIslamic finance at scale, national instant rails and regulators that move fastMENAEgypt's scale, Jordan's shared rails and Morocco's bridge to AfricaUK & wider EuropeLondon's rulebook, Swiss and Norwegian rails, Türkiye's scale and Ukraine's resilienceNorth AmericaDeep markets, many banks and payment rails modernising across three economiesLatin America & CaribbeanBrazil's Pix, Colombia's Bre-B and open finance set by ruleSub-Saharan AfricaSouth Africa's instant rails, Kenya's mobile money, West Africa's shared central bankSouth AsiaIndia's public rails, Pakistan's Islamic shift and Bangladesh's mobile moneyCentral Asia & CaucasusKaspi's super app, Astana's financial centre and new Islamic windowsEast & Southeast AsiaScale, speed and public rails: five markets setting the pace of digital bankingAustralia & NZTrans-Tasman banking: real-time rails, data rights and firm conduct rulesCompare the regionsAll eleven regions in one table

Further reading

Country register: central banks, supervisors, AML, data protection and deposit insurance, country by country →

Facts checked in October 2026. Banking rules change often, so check the official source before you rely on a detail. Bank and company names show the market; they do not imply any relationship with MTWAFIQ.