(May 16): A high-level European Central Bank (ECB) task force will propose capital neutral measures to simplify Europe’s banking rulebook by year end, European finance ministers were told this week, as the debate intensifies over the bloc’s regulatory burden.
The scope of the work includes banks’ capital structure the implementation of the final package of Basel reforms, banks’ reporting requirements and their supervision, according to people familiar with the matter. The work is being carried out by group of eurozone governors and supervisory board member Sharon Donnery.
The work will be completed by year end, so changes could be submitted to legislators by the beginning of 2026, the people said, speaking anonymously as discussions are private.
The capital neutral approach will disappoint some countries and banks who had been hoping for a reduction in the amount banks have to keep in reserve to cover unexpected losses. That could serve the dual purpose of boosting Europe’s economy through promoting lending and increasing banks’ profitability.
The timeline means the ECB’s analysis will conclude before a review of the European Union’s (EU) financial regulation which the European Commission has already brought forward by two years, to the end of 2026.
That may answer some of the criticisms of French President Emmanuel Macron, who on Thursday said Europe risked “lagging behind” other jurisdictions who are moving swiftly to overhaul cumbersome rules. Since Donald Trump took office in January, the US has already slashed regulators’ headcount, suspended rules and slated others for review, while the UK has announced various industry-friendly rule changes.
The finance ministers’ briefing also reiterated the ECB’s commitment to pursuing simplification rather than deregulation, a consistent message from European officials keen not to be seen as sacrificing financial stability to protect banks’ international competitiveness.
Still, on Thursday the chairman of the European Banking Authority Jose Manuel Campa warned that even that approach could be dangerous.
“Over-simplification poses severe risks,” Campa said in a speech to the ISDA’s annual general meeting, adding that during the financial crisis “opaque risk assessments exacerbated systemic risk, underscoring the need for careful calibration of regulatory simplicity and prudential regulation”.
The European Commission’s director general for financial stability, financial markets and capital markets union John Berrigan, meanwhile, stressed that while the EU’s executive arm had been “complicit” in overly complex regulation, “the commission cannot deliver simplification alone”.
Not least, “it will require a change away from our long-established national preferences”, Berrigan wrote in a post on LinkedIn on Thursday.