European Central Bank defends central bank independence and outlines bank supervision simplification without lowering capital levels

In an interview, European Central Bank Vice-President Luis de Guindos argued that central bank independence delivers better inflation and interest rate outcomes and said it remains important that this principle applies to the Federal Reserve. He described ECB-Federal Reserve cooperation, including swap lines, as continuing on a “business as usual” basis and framed dollar liquidity backstops as supportive of financial stability on both sides of the Atlantic. De Guindos said the ECB has not taken any concrete decisions on expanding swap or repo lines with other central banks and has not discussed pooling dollar reserves. On euro area banking policy, he defended the current level of bank capital as appropriate and not restrictive for lending, and said preserving solvency remains important given risks including geopolitical and market valuation considerations, while links between banks and non-banks are being monitored closely. He also set out the ECB’s simplification agenda to reduce administrative burden across regulation, supervision and reporting, including a proposal for a single channel of communication for bank data submissions, potential changes to stress testing and capital buffers, and two possible approaches to Additional Tier 1 capital, either limiting minimum capital requirements to equity only or making AT1 more equity-like by adjusting features such as coupons, call options and conversion triggers. Engagement with the European Commission is expected ahead of the Commission’s final report later this year, and ECB Banking Supervision is already implementing some simplification actions that do not require legislative change, with further measures described as in the pipeline.