European Central Bank Banking Supervision's Donnery backs simpler EU banking rules while rejecting lower capital buffers

In an interview with Expansión, Sharon Donnery, a Member of the European Central Bank Supervisory Board, outlined ECB Banking Supervision’s view that bank competitiveness should be built on resilience rather than weaker prudential standards. She pointed to scope to simplify the EU framework through greater harmonisation across countries, less complexity in capital buffers, a more streamlined reporting framework and further progress toward a more integrated banking market and completed banking union. Donnery argued that fragmentation remains a key constraint, with around 80% of banks’ loan portfolios still national and cross-border deposits accounting for only 2%, limiting scale, scalability and investment capacity. She said the ECB does not support lower capital buffers and that a recent ECB study found euro area and US banks have comparable capital requirements on a like-for-like basis, with current US rules potentially implying higher requirements for the largest euro area banks. On cross-border mergers, supervision assesses the combined bank’s business model, governance and resilience rather than national considerations. She also described geopolitical risk as a current supervisory priority, with results from the ECB’s reverse stress test expected in the summer.