At a Basel Committee on Banking Supervision conference, European Central Bank Vice-Chair of the Supervisory Board Frank Elderson said European banking supervision is adapting to a more interconnected and volatile risk landscape through sharper risk prioritization, simpler processes and timely remediation. Its risk tolerance framework allows supervisors to accept defined residual risks and apply less intensive scrutiny to lower-priority areas, directing resources toward material weaknesses and their root causes rather than seeking to examine every risk at every bank each year. The simplification program has reviewed more than 100 supervisory guidance publications and discontinued around 40. It has also cut average processing times for standardized, lower-risk securitizations from three months to around seven days, reduced stress testing data points by about 55% and shortened capital-related approval timelines from several months to less than six days. Elderson said these changes preserve prudential safeguards, while a structured escalation framework and capital and qualitative measures remain necessary to secure durable remediation of governance, controls, risk management and business model weaknesses. On competitiveness, Elderson argued that simplification should not mean weaker prudential requirements and called for timely, full Basel III implementation to support resilience and a level playing field. He also urged greater transparency and reporting in private markets, noting that non-bank financial institutions now account for more than half of euro area financial sector assets, and emphasized cooperation beyond prudential authorities on cyber, quantum computing, climate and nature-related risks.
European Central Bank’s Frank Elderson reports supervisory simplification gains and calls for full Basel III implementation
European Central Bank Vice-Chair of the Supervisory Board Frank Elderson outlined a more risk-focused supervisory model combining explicit risk tolerance, simpler processes and faster escalation of unresolved weaknesses. The ECB has discontinued around 40 of more than 100 reviewed guidance publications, reduced stress testing data points by about 55% and sharply shortened several approval processes. Elderson also defended strong prudential standards and called for timely, full Basel III implementation and closer international cooperation on emerging risks.