ECB Governing Council proposes simplification of EU banking rules

The European Central Bank (ECB) today published recommendations from the Governing Council’s High-Level Task Force on Simplification aimed at streamlining the European banking regulatory, supervisory, and reporting framework.

These recommendations, endorsed by the Governing Council, will be submitted to the European Commission for consideration. The proposals seek to simplify the framework while maintaining the resilience of the European banking system and ensuring effective operation of microprudential, macroprudential, and resolution authorities.

The ECB emphasizes the importance of fostering European harmonization and financial integration, including full, timely implementation of Basel III standards. The Governing Council encourages the completion of the banking union and the savings and investment union to reduce national fragmentation and promote more efficient capital markets.

Key proposals include:

• Simplifying banks’ capital requirements by merging capital buffers into two categories: a non-releasable buffer and a releasable buffer, with the latter adjustable during economic downturns.
• Reducing the leverage ratio framework from four elements to two: a 3% minimum requirement and a single buffer, which may be set to zero for smaller banks.
• Enhancing the quality of bank capital by increasing the capacity of Additional Tier 1 capital to absorb losses, maintaining Basel compliance and resilience.
• Expanding the small banks regime to include more banks and simplifying their rules to increase proportionality.
• Implementing automatic reciprocation of macroprudential measures across countries to ensure consistent application.
• Aligning resolution requirements for all banks with those for global systemically important banks, without reducing loss-absorbing capacity.
• Shifting EU banking rules from directives to directly applicable regulations for better harmonization.
• Completing the Single Rulebook and harmonizing rules on licensing, governance, and related-party transactions to reduce complexity.
• Simplifying the EU-wide stress test methodology and scope to improve its usefulness and coordination between macroprudential and microprudential buffers.
• Expanding the role of the Macroprudential Forum to oversee overall capital levels and cross-country heterogeneities.
• Creating a fully integrated European reporting system by sharing data more widely among authorities, reducing reporting burdens, and focusing on material data.

The ECB will present these proposals to the European Commission, which plans to publish a report on the banking system in 2026. Additionally, the ECB released a report titled “Streamlining supervision, safeguarding resilience,” discussing ongoing initiatives to improve supervisory effectiveness and efficiency.

The ECB also welcomes the ESRB’s report on task simplification published today. For media inquiries, contact Esther Tejedor at +49 172 5171280 or François Peyratout at +49 172 8632119.