The European Central Bank (ECB) will propose to the European Commission to thin out the “forest” of regulations on the capital market and relieve the banks.
Namely, the ECB wants to reduce the number of conditions and forms and simplify the supervision system. Smaller financial institutions, especially in Germany, have been complaining for years about the large number of regulations they have to follow, writes DPA.
“The Council of the ECB proposes to harmonize the regulations on European Union banks according to the principle of proportionality,” the ECB announced.
In essence, banks should face fewer capital buffer requirements that the ECB uses to protect the market from shocks. At the same time, a smaller number of regulations does not mean looser conditions.
The measures, which must be approved by the Commission, include the unification of different reserve requirements and simpler so-called stress tests, with which supervisory authorities check banks’ resistance to crises through different scenarios.
The Commission will include the opinion on the ECB’s proposals in the report on the state of the banking system in the single market for 2026. The goal of changing the regulations is to strengthen the competitiveness of European banking.
Demanding capital regulations were introduced by Europe in response to the 2008 global financial crisis. That regulation and the ECB’s microscopic supervision are the result of lessons learned from the collapse of financial institutions.
The simpler, faster and cheaper administration in the market that the ECB wants has in the background the acceleration of the deregulation of the American banking sector, which is being pushed by President Donald Trump, reports Bankar me.
European banks fear that this will put them in an even more subordinate position compared to the American competition, which is already more profitable.
The assessment that the European banking system is excessively rigorous was recently expressed by Chancellor Friedrich Merz, with the remark that Germany is willing to step forward to meet the financial sector.
