Frank Elderson of the ECB discusses the importance of regulation, the need for market integration, and risks associated with artificial intelligence in banking, in an interview conducted on October 14, 2026.
Frank Elderson, Member of the Executive Board of the European Central Bank (ECB) and Vice-Chair of the Supervisory Board, was interviewed by Aloysius Widmann on October 14, 2026.
He emphasized that the costs of regulation are justified by the increased resilience of European banks following the 2008 financial crisis. Banks today are better capitalized, liquid, and more profitable.
Regarding supervision, Elderson noted that while regulation has become more complex due to diverse bank operations and risks such as geopolitical tensions, cyber threats, climate change, and artificial intelligence, efforts have been made to simplify reporting and processes without deregulation. Resilience remains the priority.
He identified fragmentation of the European banking market as the main obstacle to competitiveness, limiting cross-border activities and economies of scale. Elderson advocates completing the Single Market, banking union, and establishing a European deposit insurance scheme to enhance integration.
He discussed the potential benefits of a fully integrated banking market, including increased competition, better products, and support for investments in climate and demographic challenges. Removing legal and operational obstacles is urgent.
On international standards, Elderson stressed the importance of Basel III and minimum standards to ensure global competitiveness and risk management, warning against loosening regulations to gain a competitive edge.
He explained that supervision should be proportionate to the size and complexity of banks, with proposals to raise the threshold for simplified regimes from €5 billion to €10 billion in assets, and to extend review periods and use existing data more effectively.
Regarding artificial intelligence, Elderson highlighted its potential to improve risk management and efficiency but warned of cyber risks, biases, data quality issues, and operational dependencies on cloud providers. Banks are asked to review cybersecurity measures and submit action plans by October end.
He also addressed risks from interconnectedness between banks and non-banks, noting that market-based finance and private credit can pose systemic risks if lending shifts outside the banking sector. Banks must monitor linkages and manage associated risks carefully.
