The European Central Bank (ECB) has published and the Governing Council has endorsed recommendations from its High-Level Task Force on Simplification, setting out proposals to streamline the EU’s banking regulatory, supervisory and reporting framework. The package aims to reduce complexity while maintaining resilience, and it will be presented to the European Commission. Key recommendations include simplifying capital stacks by merging existing buffers into a non-releasable buffer and a releasable buffer that authorities could lower in stress, while preserving existing powers. 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. The report also proposes enhancing the going-concern loss-absorbing capacity of Additional Tier 1 capital, or alternatively removing non-equity elements from the going-concern capital stack subject to Basel III compliance and capital neutrality. Proportionality would be increased by expanding the EU small banks regime to cover more banks and simplifying applicable rules in a harmonised manner, alongside measures such as automatic reciprocation of macroprudential measures and closer alignment of resolution requirements for all banks with those applied to global systemically important banks, without reducing loss-absorbing and recapitalisation resources. Broader structural recommendations include shifting more EU banking rules from directives to directly applicable regulations, completing the Single Rulebook and harmonising licensing, governance and related-party transaction rules, streamlining the EU-wide stress test, creating a European governance mechanism for a holistic view of overall capital (including via an expanded role for the Macroprudential Forum), and moving toward integrated “report once” reporting supported by wider data sharing among authorities, periodic reviews of reporting requirements every three to five years, and a materiality threshold for data resubmission requests. The ECB will submit the proposals to the European Commission, which is preparing a report on the overall situation of the banking system due in 2026. Separately, the ECB also published “Streamlining supervision, safeguarding resilience” describing supervisory initiatives that can be implemented under existing legislation and are intended to complement the Task Force recommendations.
European Central Bank 2025-12-11
European Central Bank endorses simplification recommendations including a two-layer capital buffer approach and expanded proportionality for smaller banks
The European Central Bank (ECB) has endorsed recommendations from its High-Level Task Force on Simplification to streamline the EU’s banking regulatory, supervisory, and reporting framework, aiming to reduce complexity while maintaining resilience. Key proposals include merging capital buffers, simplifying the leverage ratio framework, and expanding the EU small banks regime. The ECB will present these proposals to the European Commission, which is preparing a report on the banking system due in 2026.