ECB recommendations to the Commission to simplify rules for banks

Brussels -Fewer national rules, too many and too fragmented, and more European systems, harmonized and coordinated at the supra‑national level. Simplification for banks requires accelerating the integration of regulatory, supervisory, and reporting mechanisms. The Governing Council of the European Central Bank adopts recommendations for a sector reform in the wake of the European Commission’s work, and also shares its thoughts. The EU executive is preparing a report on the overall situation of the banking system, due to be presented in 2026, and the ECB is offering Brussels elements for omnibus packages that can be truly effective, without measures that could compromise the financial stability of credit institutions.​

The ECB is keen to point out that it is necessary to “simplify the framework, while maintaining the resilience of the European banking system and ensuring that microprudential, macroprudential and resolution authorities continue to meet their objectives effectively.” Not an easy goal, which leads Frankfurt’s experts to suggest to the EU executive how to move to ensure the desired result. 

One of the recommendations from the Governing Council is to simplify the structure of banks’ capital requirements and buffers (capital reserves to absorb potential shocks). This is to be done through two changes. First, unifying the current levels of capital buffers into just two: a non-releasable buffer, not to be touched, and a releasable buffer, which can be drawn upon, which the authorities can reduce in times of crisis. In unifying the buffers, it will be important to preserve the authorities’ existing powers and competences. Secondly, it proposes reducing the leverage ratio framework from four to two elements: a minimum requirement of 3 percent and a single buffer, which could be set to zero for smaller banks.​

European control room