The EU intends to apply capital requirements tailored to small and regional banks

Brussels – Competitiveness and investment require a new, more efficient and more effective banking system. It is on this basis that the Commission is taking steps towards a reform which is now in the hands of the Member States. With its communication on the competitiveness of the banking sector (a non-legislative text setting out policy guidelines), the Commission is proposing that governments prioritise reform of a sector considered key to supporting the real economy within the 12-point political agenda. There are two key measures in the document presented by the European Commission: simplifying European banking sector rules, in line with the von der Leyen team’s new course, launched last year, and applying international liquidity requirements—known as Basel III—specifically tailored to smaller, locally based banks. 

At present, the European Union applies the Basel III standards in full and uniformly to all banks, not just large, internationally active ones. A certain degree of proportionality is provided for in the international agreement, but the European Commission now intends to provide further proportionality for smaller banks, including the possible adjustment of criteria and thresholds for small and non-complex institutions, and the adaptation of the relevant requirements.

 “We need more proportionality and to reduce complexity, so as to eliminate burdens and make everything simpler,” emphasises the Commissioner for Financial Services and the Savings and Investment Union, Maria Luís Albuquerque.

The redefinition of capital requirements according to the size of banks is intended to address the stated objective of “building a more integrated, efficient, and competitive banking sector, capable of strengthening the European economy by financing growth, innovation, and strategic priorities, supported by a more balanced regulatory framework,” with conditions that allow credit institutions to take on prudent risks, while safeguarding the sector’s resilience and offering better services to households and businesses. 

Added to this is a commitment to simplification, with the European Commission promising to “make the specific capital requirements for banks and supervisory guidelines more transparent and targeted.” The aim is therefore to further simplify and harmonise the macro-prudential and resolution buffers (the so-called backstops) and to encourage the authorities to improve their coordination mechanisms so that they set prudential requirements in an increasingly coordinated manner. Added to this is the intention to introduce targeted changes to enable the European Banking Authority (EBA) to ensure greater proportionality, simplification, and automation of banking reporting. 

“This communication constitutes a key pillar of the Commission’s strategy for the Savings and Investment Union,” emphasises Albuquerque. The proposal, she explains, aims to create a banking sector that is “sound and of sufficient size to finance growth and strategic priorities, such as innovation, the green transition, and defence, while providing high-quality financial services to households and businesses.” 

The proposal has been welcomed by the Forza Italia delegation in the European Parliament: “Banking regulation must take into account the size, business model, and local roots of financial institutions,” commented Fulvio Martusciello and Marco Falcone, respectively head and deputy head of the Forza Italia delegation to the European Parliament. “A one-size-fits-all approach does not work for everyone: this will be the line that Forza Italia and the EPP will continue to uphold in the debate on future reforms of the European banking sector.”