The European Central Bank (ECB) published and the Governing Council endorsed the High-Level Task Force on Simplification’s recommendations to simplify the EU’s regulatory, supervisory and reporting framework for banks, and will present the proposals to the European Commission. The package aims to reduce complexity while maintaining resilience, preserving authorities’ existing powers, and supporting full, timely and faithful implementation of Basel III. Key recommendations include simplifying capital stacks by merging existing buffer layers into a non-releasable buffer and a releasable buffer that can be lowered in stress, while keeping non-binding Pillar 2 guidance separate. The leverage ratio framework would be reduced to a 3% minimum requirement plus a single buffer that could be set to zero for smaller banks. Other proposals cover enhancing going-concern loss absorbency of Additional Tier 1 capital or removing non-equity elements from the going-concern stack (subject to Basel compliance and capital neutrality), expanding and simplifying the prudential regime for small banks, automatic reciprocation of macroprudential measures, and aligning resolution requirements for all banks more closely with the global systemically important bank framework without reducing loss-absorbing and recapitalisation capacity. The recommendations also call for greater harmonisation by shifting EU banking rules from directives to directly applicable regulations, streamlining the EU-wide stress test, expanding the Macroprudential Forum to support a more holistic view of capital across the banking union, and moving toward an integrated “report once” system with periodic reviews of reporting requirements and a materiality threshold for data resubmission requests. The European Commission is preparing a report on the overall situation of the banking system due in 2026. Separately, the ECB also published “Streamlining supervision, safeguarding resilience”, setting out supervisory initiatives under existing legislation that complement the simplification recommendations and can be implemented independently.
European Central Bank - Banking Supervision 2025-12-11
European Central Bank Governing Council proposes EU banking rule simplification including two-layer capital buffers and a streamlined leverage ratio
The European Central Bank (ECB) endorsed recommendations to streamline the EU's regulatory, supervisory, and reporting framework for banks, aiming to reduce complexity while maintaining resilience and Basel III compliance. Key proposals include merging capital buffer layers, simplifying the leverage ratio framework, and enhancing the prudential regime for small banks. The ECB also published a report on supervisory initiatives complementing these recommendations.