The ECB Governing Council endorses recommendations to simplify EU banking regulations, including risk framework reduction, enhanced proportionality, and harmonization, to improve resilience and integration. The proposals will be submitted to the European Commission.
The European Central Bank (ECB) Governing Council has endorsed recommendations from the High-Level Task Force on Simplification aimed at streamlining the European banking regulatory, supervisory, and reporting framework. These recommendations will now be presented to the European Commission.
The proposals focus on simplifying the risk-weighted and leverage ratio frameworks, introducing a simpler prudential regime for smaller banks, and establishing a European governance mechanism for capital oversight. They also aim to finalize the savings and investment union, including completing the banking union, to promote cross-border integration and more efficient capital markets.
Key recommendations include merging capital buffers into two categories (a non-releasable and a releasable buffer), reducing the leverage ratio framework to two elements (a 3% minimum requirement and a single buffer), and enhancing the quality of banks’ capital by expanding the capacity of Additional Tier 1 capital to absorb losses.
The Council proposes expanding the small banks regime to include more banks, simplifying macroprudential measures through automatic reciprocation, and aligning resolution requirements with international standards. It also recommends shifting EU banking rules from directives to directly applicable regulations, completing the Single Rulebook, and harmonizing rules on licensing, governance, and related-party transactions.
Further, the Council suggests streamlining the EU-wide stress test methodology, adopting a holistic view of overall capital in the banking union, and improving coordination through the Macroprudential Forum. For reporting, authorities are encouraged to share data more widely, enabling banks to report once via a centralized system, with review cycles every three to five years. Public disclosure will be derived from supervisory data, reducing reporting burdens.
The ECB will present these proposals to the European Commission, which is preparing a report on the banking system due in 2026. Additionally, the ECB published a report titled “Streamlining supervision, safeguarding resilience,” discussing ongoing initiatives to enhance supervisory effectiveness and efficiency. The ECB also welcomes the ESRB’s report on task simplification.
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