ECB Vice-Chair discusses regulation, competitiveness, and AI risks in banking

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, more liquid, and more profitable.

Elderson acknowledged that regulation and supervision have become more complex due to the diversity of banks and evolving risks such as geopolitical tensions, cyber threats, climate change, and artificial intelligence. He noted ongoing efforts to simplify reporting and processes without compromising resilience.

The Vice-Chair identified fragmentation of the European banking market as the main obstacle to competitiveness, advocating for completing the Single Market, banking union, and establishing a European deposit insurance scheme. He highlighted that a fully integrated market would foster more cross-border lending and competition, enabling banks to better fund future investments.

He stressed the importance of maintaining international standards like Basel III to ensure global competitiveness and risk management. Loosening standards could shift burdens from regulation to supervision, which is undesirable.

Elderson discussed proportionality in supervision, suggesting raising the threshold for small and non-complex banks from €5 billion to €10 billion in assets, and implementing other measures to reduce regulatory burdens without impairing financial stability.

Regarding artificial intelligence, he noted its potential to improve risk management and efficiency but warned of cyber risks, biases, data quality issues, and operational dependencies. Banks are asked to review cybersecurity measures and submit action plans by the end of October.

He also highlighted concerns about interconnectedness between banks and non-banks, especially with the rise of private credit and corporate bonds funding AI firms. Managing these linkages is critical to prevent risk concentrations that could impact the banking system.