European Central Bank sets red lines for simplifying banking regulation and supervision to support competitiveness

The European Central Bank’s Chair of the Supervisory Board, Claudia Buch, published a contribution for the Forum on Financial Supervision arguing that strong prudential regulation and supervision support banks’ competitiveness by underpinning resilient business models and trust in European banking markets. It frames regulatory and supervisory streamlining as compatible with competitiveness only if it preserves current levels of resilience and remains fully consistent with international prudential standards. The contribution points to recent ECB recommendations to the European Commission on simplifying the legislative framework for banking regulation, supervision and reporting, alongside a Supervisory Board reform agenda to make supervision more efficient, effective and risk-based. It highlights four policy priorities: uphold a global level playing field through agreed international standards; strengthen cross-border provision of financial services to deepen the Single Market; maintain strong capital standards as a basis for resilience and long-term competitiveness; and complete the banking union, including establishing a European deposit insurance scheme, to improve crisis management and reduce the bank-sovereign nexus. As context, it notes limited cross-border integration in euro area banking, including that around 80% of banks’ loan portfolios are invested domestically and that cross-border merger activity has declined. The contribution is positioned as input into the broader EU policy debate on banking sector competitiveness, including the European Commission’s targeted consultation launched on 11 February 2026.