European Central Bank Banking Supervision sets conditions for simplifying bank rules while promoting competition and strong capital

European Central Bank Banking Supervision published a contribution by Supervisory Board Chair Claudia Buch setting out a supervisory view on banks’ competitiveness, arguing that strong regulation and supervision support resilient business models and that any streamlining of requirements must not weaken resilience or depart from international prudential standards. The contribution links competitiveness to bank-level efficiency, governance and risk controls, and cautions that relaxing standards to boost short-term growth risks higher payouts and greater financial stability risks rather than sustained lending. It highlights recent ECB recommendations to the European Commission on simplifying the legislative framework for banking regulation, supervision and reporting, alongside the Supervisory Board’s reform agenda to make supervision more efficient, effective and risk-based. Four priorities are emphasised: preserving a global level playing field through adherence to agreed standards, increasing cross-border provision of financial services to deepen the Single Market, maintaining strong capital standards with the note that evidence does not support claims that higher capital harms competitiveness, and strengthening banking union institutions including by prioritising a European deposit insurance scheme (EDIS) to improve crisis management and further weaken the bank-sovereign nexus.