Keep it simple!
The European Central Bank (ECB) has endorsed recommendations from its High-Level Task Force on Simplification to streamline the European regulatory, supervisory, and reporting framework for banks. These proposals aim to simplify the system while maintaining the resilience of the European banking sector and ensuring that microprudential, macroprudential, and resolution authorities can continue to meet their objectives effectively.
Key recommendations include:
- Simplification of capital requirements: The existing capital buffers are to be combined into two buffers . The framework for the leverage ratio is to be reduced from four to two elements.
- Regime for smaller banks: Introduction of a small banking regime that expands on existing supervisory regulations but provides for further simplifications.
- Improved governance: A European governance mechanism is to enable a ‘holistic’ view of the overall level of capital.
- Harmonisation and integration: Completion of both the Banking Union and the Savings and Investment Union to promote capital market integration.
Message understood, but not yet convinced
The ECB emphasises the importance of international cooperation and the full implementation of Basel III. The recommendations aim to reduce fragmentation, increase transparency and make supervision more efficient. The aim is similar to the European Commission’s plan to revive the securitisation market through simplification – to arrive at up to 32 instead of currently 4 different approaches for calculating adequate risk weights for securitisation positions in a first legislative draft (see TSI kompakt of 17 June 2025).
Outlook and next steps
The ECB plans to present the European Commission’s new regulatory proposals by mid-2026. Implementation of the measures is expected to begin in the second half of 2026. The ECB will closely monitor developments and make further adjustments as necessary to ensure financial market stability.
Further information
Press Release: www.ecb.europa.eu/press/pr/date/2025/html