Frank Elderson, ECB Executive Board Member, emphasizes the importance of resilient banks and streamlined regulation for Europe’s economic competitiveness at the ECB Banking Supervision Forum 2025.
Frank Elderson, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board, delivered the keynote speech at the ECB Forum on Banking Supervision 2025. He highlighted the importance of broad-based resilience in banks, including strong financials, operational resilience, sound governance, and risk management.
He noted that since the establishment of European banking supervision in 2014, banks have become significantly stronger, with improved capital ratios, liquidity positions, asset quality, and profitability. Euro area banks now have a Common Equity Tier 1 (CET1) capital ratio of 16%, up from 12.7% a decade ago, and non-performing loans have decreased to 1.9%.
Resilient banks have supported the economy through crises, including the COVID-19 pandemic, by continuing to supply credit. Elderson emphasized that resilience contributes to both safety and the ability to support economic activity, thus enhancing competitiveness in a bank-based economy like Europe.
He addressed concerns about regulatory complexity, noting that fragmentation at the national level and evolving external risks have increased regulatory size and complexity. The ECB has initiated simplification efforts, including reforming the Supervisory Review and Evaluation Process (SREP) and streamlining supervisory processes, such as faster decision-making and reduced reporting costs.
Proportionality measures for small and non-complex institutions are already in place, with potential for further expansion, ensuring safety without unnecessary burden. Elderson also discussed the complexity of the EU’s risk-based capital framework and the need for simplification to improve transparency and predictability.
Beyond regulation, structural and macroeconomic factors influence competitiveness. European banks face challenges such as smaller home markets, lower IT investments, and slower productivity growth compared to US banks. Completing the banking union, advancing capital market integration, and completing the Single Market are essential steps to enhance growth and innovation.
He concluded that Europe must leverage resilient, innovative banks and a coordinated effort among stakeholders to strengthen its strategic autonomy, competitiveness, and prosperity. Maintaining financial stability is crucial for sustainable growth and innovation.
