CEE Perspective Weekly Digest - Issue 7

Renew Europe calls for stronger EU financial sovereignty

Renew Europe published a policy paper arguing that Europe should treat its financial infrastructure as a strategic asset and reduce its dependence on non-EU providers for payments, capital markets and financial services. Framing financial sovereignty as an issue of resilience rather than protectionism, the paper argues that the EU should be able to finance investment, process payments and support its economy even in a more fragmented geopolitical environment. 

To achieve this, Renew proposes completing the Savings and Investments Union through deeper capital market integration, stronger European supervision, simplified cross-border investment rules and measures to channel more household savings into productive investment. The paper also calls for expanding the geographical reach of SEPA, implementing EMIR, extending TARGET2 operating hours, promoting euro-denominated stablecoins, encouraging more financial market infrastructure within the EU and reducing the impact of extraterritorial financial sanctions on European businesses. 

Why it matters for CEE

The paper reflects a broader shift in EU financial policy, with capital markets, payment systems and market infrastructure increasingly viewed not only as economic tools but also as strategic assets that underpin Europe's competitiveness and resilience. For Central and Eastern Europe, further integration of European capital markets could improve access to long-term financing for businesses, strengthen cross-border investment and support the region's economic convergence.

Although the paper is not legislative, it provides an important indication of the policy priorities that Renew Europe is likely to promote in upcoming negotiations on the Savings and Investments Union, financial market infrastructure and the EU's broader competitiveness agenda. It also reinforces a wider trend in Brussels: financial policy is increasingly being shaped not only by efficiency and stability considerations, but also by geopolitical resilience and the EU's ambition to strengthen the international role of the euro. 

SFDR negotiations delayed as Parliament seeks compromise on sustainability categories 

The European Parliament has postponed its planned vote on the review of the Sustainable Finance Disclosure Regulation (SFDR), with the ECON Committee now expected to consider its position in September rather than July. The delay reflects ongoing negotiations on several politically sensitive aspects of the reform, particularly the design of the new sustainability categorisation framework and the balance between facilitating investment in the transition to a sustainable economy and maintaining robust safeguards against greenwashing. 

While compromise amendments broadly support replacing the current Article 8 and Article 9 classifications with the proposed Sustainable, Transition and ESG Basics categories, significant differences remain over the treatment of fossil fuel-related activities, sovereign debt, mandatory principal adverse impact (PAI) disclosures and the sustainability safeguards applicable to products using the new labels. Compared with the Council's General Approach, Parliament appears to favour a more stringent approach, including stronger anti-greenwashing provisions, broader mandatory PAI reporting, tighter sustainability criteria and more limited recognition of sovereign debt within the new categorisation framework.

Source: CEE Perspective illustration based on the Council of the European Union, General Approach on the Proposal for a Regulation amending the Sustainable Finance Disclosure Regulation (24 June 2026) and the European Parliament ECON Committee technical compromise amendments on the SFDR Review (July 2026). 

Why it matters for CEE

The postponement underlines that the final shape of the SFDR remains far from settled, despite broad political support for replacing the existing disclosure regime with a clearer product categorisation framework. The outcome of the negotiations will determine how sustainable investment products are classified and marketed across the EU, with implications for asset managers, institutional investors and capital markets more broadly. 

For Central and Eastern Europe, several of the unresolved issues are particularly relevant. The treatment of sovereign debt could influence the role of government bonds within sustainable investment strategies, while stricter sustainability criteria and disclosure requirements may increase implementation costs for market participants operating in smaller or less mature financial markets. More broadly, the ongoing negotiations illustrate the challenge of striking a balance between strengthening investor confidence through robust sustainability standards and ensuring the framework remains sufficiently flexible to support investment in the transition to a more sustainable European economy. 

Retail Investment Strategy moves towards final adoption

The Retail Investment Strategy (RIS) has moved a step closer to becoming law after the European Parliament's ECON Committee endorsed the provisional trilogue agreement reached with the Council. The endorsement follows several months of technical discussions between Member States on possible simplification measures, which delayed formal approval of the political agreement reached in late 2025. The package is now expected to be endorsed by the European Parliament in plenary on 11 November 2026, before its publication in the Official Journal later this year. 

The reform seeks to strengthen retail investor protection while improving confidence in EU capital markets. At its core is a new Value for Money (VfM) framework requiring manufacturers to demonstrate that the costs and charges of investment products are justified in relation to their features, performance and target market. The agreement also modernises the PRIIPs Key Information Document (KID) by introducing a clearer "Product at a Glance" dashboard, enhanced digital disclosures and improved cost comparability for complex investment products. Other elements include revised suitability and appropriateness assessments, broader criteria for professional-client classification, new risk-warning requirements for particularly risky products and enhanced supervisory powers for ESMA and EIOPA to promote more consistent implementation across Member States.

Source: CEE Perspective illustration based on the provisional trilogue agreement on the Retail Investment Strategy endorsed by the European Parliament ECON Committee (23 June 2026) and the European Commission Proposal for a Retail Investment Strategy (COM(2023) 279 final). 

Why it matters for CEE

The RIS represents one of the most significant recent reforms affecting the EU retail investment market and forms part of the broader Savings and Investments Union agenda aimed at encouraging greater retail participation in capital markets. By improving transparency, comparability and supervisory convergence, the package seeks to make investment products easier for retail investors to understand and compare across the EU. 

For Central and Eastern Europe, where household participation in capital markets generally remains below the EU average and savings continue to be concentrated in deposits, the reforms could support the gradual development of retail investment markets and greater cross-border distribution of financial products. At the same time, the new Value for Money framework and enhanced disclosure requirements will require firms to adapt product governance, pricing and reporting processes, making consistent implementation across Member States an important issue to monitor as the legislation enters the implementation phase. 

Euro area banks tighten lending standards despite modest rebound in business loan demand

The European Central Bank's latest Bank Lending Survey, published on 21 July, shows that euro area banks continued to tighten credit standards for both businesses and households during the second quarter of 2026, reflecting heightened risk perceptions linked to the economic outlook, geopolitical uncertainty and energy developments. Credit standards tightened moderately for corporate lending, while banks also reported stricter conditions for mortgages and consumer credit. Looking ahead, banks expect lending standards to tighten further across all major loan categories in the third quarter.

Source: European Central Bank, July 2026 euro area Bank Lending Survey, Chart 1 (21 July 2026). 

Despite tighter lending conditions, demand for business loans increased slightly, supported by higher financing needs for inventories, working capital, fixed investment by large firms and debt refinancing. In contrast, demand for housing loans declined significantly and consumer credit continued to soften, reflecting weaker consumer confidence and the impact of interest rates. The survey also highlights a growing divergence in lending conditions across sectors, with the most pronounced tightening reported in energy-intensive manufacturing and the automotive industry, while firms investing in the green transition continued to benefit from more favourable lending conditions.

Source: European Central Bank (2026), July 2026 euro area Bank Lending Survey, Chart 2.

Hungary resumes monetary easing as inflation moderates 

The Magyar Nemzeti Bank (MNB) lowered its base rate by 25 basis points to 5.75%, citing continued disinflation and a lower domestic risk premium, which the Monetary Council said had created scope for further monetary easing. While inflation is expected to remain below the Bank's 3% target throughout the remainder of 2026 and into 2027, policymakers stressed that geopolitical developments, energy prices and Hungary's fiscal outlook continue to pose important risks. The MNB indicated that, should favourable trends persist, there may be room for further gradual rate cuts over the summer, with future decisions guided by the September Inflation Report. 

Erste Group Researchexpects easing inflation and the relatively strong forint to continue supporting the MNB's gradual easing cycle. However, it cautions that renewed geopolitical tensions, higher energy prices or a deterioration in the global outlook could delay further monetary easing. 

CEE markets navigate geopolitical uncertainty as investors focus on sovereign risk and domestic demand 

While monetary policy paths continue to diverge across the region, investor attention remains focused on sovereign risk, domestic financing conditions and geopolitical developments. According to Erste Group research, renewed geopolitical tensions have contributed to weaker CEE currencies and higher government bond yields, particularly in Hungary and Poland, highlighting the sensitivity of regional markets to shifts in global risk sentiment. 

Domestic developments nevertheless continue to illustrate the different economic dynamics across Central and Eastern Europe. In the Czech Republic, demand for government retail bonds significantly exceeded expectations, with households purchasing around CZK 74 billion in the latest offering. The strong uptake underlines the continued appetite of retail investors for secure domestic investment products and their growing role in financing government borrowing. 

Elsewhere, Romania remains under close market scrutiny ahead of Fitch Ratings' sovereign review on 31 July. While Erste Group Research notes that political uncertainty persists, it considers this year's fiscal performance broadly consistent with maintaining the country's current rating, although weaker demand for Romanian government securities suggests investors remain focused on fiscal consolidation. Meanwhile, Poland is expected to conclude the second quarter on a relatively strong note, with industrial production and retail sales forecast to remain resilient despite ongoing debate over the timing of future interest rate cuts. 

Poland expands Security and Defence Fund to PLN 23 billion

Beyond market developments, governments across the region are also expanding the use of public investment vehicles to strengthen long-term resilience. Earlier in June, Poland increased the budget of its Security and Defence Fund (FBiO) to PLN 23 billion (€5 billion) under the fifth revision of its Recovery and Resilience Plan (RRP). The Fund will finance investments in civil protection infrastructure, dual-use transport networks, cybersecurity and the modernisation of enterprises, including support for research and development in the defence sector. The investment policies will now be submitted to the European Commission as part of Poland's eighth RRP payment request. 

The initiative is notable as Poland is the only EU Member State to allocate Recovery and Resilience Facility resources directly to defence and security objectives. Around half of the Fund will support projects undertaken by local authorities, while the remainder will provide loans and equity financing to companies operating in the defence, technology, industrial, transport and energy sectors through Bank Gospodarstwa Krajowego (BGK) and the special-purpose vehicle Chrobry S.A. 

The initiative illustrates how EU recovery funding is increasingly being deployed through dedicated financial instruments to strengthen industrial capacity, resilience and long-term competitiveness.

28 July – EBA public hearing on market risk benchmarking: The European Banking Authority will hold a public hearing on its draft Implementing Technical Standards for the 2027 market risk benchmarking exercise. The consultation forms part of the EBA's work to strengthen supervisory benchmarking and ensure more consistent implementation of the market risk framework across the EU banking sector.

·       30 July – Czech National Bank Board meeting: The Czech National Bank's Bank Board will hold a regular meeting to discuss operational and supervisory matters. While no monetary policy decision is scheduled, the meeting forms part of the CNB's ongoing oversight of financial stability and the banking sector ahead of its next monetary policy meeting in August.

·       31 July – Czech National Bank publishes June banking and monetary statistics: The Czech National Bank will release its latest banking statistics, monetary developments and harmonised monetary survey for June 2026. The publications provide an updated snapshot of credit growth, banking sector developments and monetary conditions in one of Central Europe's largest financial markets.

This August, CEE Perspective is launching Conversations with the Experts, a new event series bringing our community closer to the people whose work and experience offer a deeper understanding of the economic and financial developments shaping Central and Eastern Europe. Alongside our monthly webinars, the series will feature senior representatives from multilateral institutions, regional experts, economists, market practitioners and other leading voices from across Europe. Each conversation will focus on a timely issue and create space for a more direct and in-depth exchange on its implications for the CEE region. 

For the inaugural edition, we will welcome a high-level representative from the European Investment Bank for a discussion on one of the region’s most pressing priorities. It will be a valuable opportunity to hear directly from one of Europe’s leading financial institutions and add some substance to the quieter summer calendar. The guest, topic and registration details will be announced shortly. Stay tuned.

• Commission launches new initiatives to strengthen financial literacy across the EU: The European Commission has launched two initiatives under its EU Financial Literacy Strategy to improve the quality and effectiveness of financial education across Member States. The first invites submissions of successful financial literacy initiatives to identify best practices in areas such as investing, saving and financial risk awareness, while the second seeks stakeholders to help develop a voluntary European Code of Conduct for organisations delivering financial literacy programmes. The initiatives aim to promote transparent, high-quality and impartial financial education and support more consistent approaches across the EU, with the Code expected to be adopted in the first quarter of 2027.

•        EBA launches first consultations implementing the revised Deposit Guarantee Schemes Directive (DGSD3): The EBA published four consultations on draft technical standards and guidelines supporting the implementation of DGSD3, including rules on depositor information, information exchange during bank failures, the treatment of client funds and the investment of DGS resources. The proposals are intended to enhance depositor protection, improve operational readiness and ensure more consistent application of the revised framework across Member States. The consultation closes on 23 October 2026.

•     European Commission renews commitment to the European Pillar of Social Rights: The Commission adopted a Communication reaffirming the European Pillar of Social Rights as the EU's framework for promoting fair labour markets, social protection and equal opportunities. The Communication identifies affordability, the impact of artificial intelligence on work, and reducing inequalities as key priorities, while announcing a first-stage consultation on labour market activation, a new high-level group on AI and the future of work, and further work on the forthcoming Quality Jobs Act.

•       Commission opens feedback period on Banking Competitiveness Communication: Following the publication of its Communication on strengthening the competitiveness of the EU banking sector, the European Commission opened a public feedback period running until 16 September 2026. The consultation provides stakeholders with an opportunity to comment on the Commission's proposed reform agenda, which aims to reduce fragmentation, simplify the regulatory framework and strengthen the banking sector's capacity to support investment and economic growth.

•     EBA finalises framework for banking mergers and acquisitions: The European Banking Authority (EBA) published its final draft regulatory and implementing technical standards governing material acquisitions, transfers, mergers and divisions involving credit institutions under the Capital Requirements Directive (CRD). The framework introduces harmonised information requirements, common supervisory assessment methodologies and clearer cooperation procedures between competent authorities. It also includes simplified requirements for intra-group transactions and smaller institutions, with the aim of supporting banking consolidation, reducing regulatory uncertainty and promoting greater integration of the EU banking market.