A stele with the inscription “European Central Bank – Eurosystem” stands in front of the European Central Bank (ECB) in Frankfurt. Arne Dedert/dpa
The European Central Bank unveiled proposals on Thursday aimed at simplifying the complex capital rules for banks in Europe as well as its oversight of smaller banks.
Smaller European lenders routinely complain about the number of rules they have to follow.
“The Governing Council proposes significantly increasing proportionality under EU banking rules by expanding the existing small banks regime to include more banks and simplifying their applicable rules in a prudent and harmonised manner,” the Frankfurt-based bank said.
The task force set up by the ECB also recommends merging different capital buffers that lenders must maintain as cushions against crises.
The regular EU-wide stress tests, in which supervisors examine banks’ resilience under various scenarios, are to be streamlined, according to the ECB.
The ECB is now submitting its proposals to the European Commission, which is due to publish a report in 2026 on the overall state of the banking system in the European Union’s single market.
Brussels is trying to streamline many EU rules in a bid to strengthen Europe’s competitiveness.
The current framework was introduced after the global financial crisis that started in 2008. It draw heavily on lessons learned from the collapse of lenders at the time.
Europe’s simplification drive is also due to financial sector deregulation efforts by the administration of US President Donald Trump.
European banks fear this could put them at a disadvantage compared to US rivals, which have been more profitable for years.
German Chancellor Friedrich Merz, a former senior finance executive, recently described Europe’s banking regulation as too rigorous, holding out the prospect of concessions to the financial sector.