In a keynote speech, European Central Bank Executive Board member Frank Elderson set out how the ECB intends to simplify banking supervision and reporting while preserving the resilience of the European banking system. A central theme was improving clarity on what is legally required versus what reflects supervisory expectations or examples of sound practice, to reduce overlaps, undue complexity and compliance costs. The speech explained that ECB supervisory guides aim to ensure consistency across the banking union and transparency on how the ECB interprets and applies Union law and its processes. Elderson distinguished between (i) binding obligations that stem only from EU regulations or directives as implemented in national law, with guides consolidating those requirements and the ECB’s interpretations based on Court of Justice case law and, where relevant, European Banking Authority (EBA) guidelines, (ii) non-binding supervisory expectations that steer behaviour in areas not fully specified in legislation, and (iii) good practices as illustrative examples that are not grounds for enforceable measures. On the ECB’s draft Guide on governance and risk culture, published in July 2024, he said the final guide is expected well into 2026, as the ECB will incorporate industry feedback and the outcome of the EBA’s consultation on its Guidelines on Internal Governance. On process simplification, the ECB pointed to reforms to the Supervisory Review and Evaluation Process launched in 2022, including a risk tolerance framework and a multi-year approach, alongside efforts to cut reporting costs through an integrated reporting framework for statistical, prudential and resolution authorities and process streamlining under its “next-level supervision” project. It also highlighted faster fit and proper assessments, with average processing time reduced from 109 days in 2023 to 97 days in 2024 and to 61 days for non-complex cases. Separately, the ECB’s Governing Council-established High-Level Task Force on Simplification plans to deliver proposals by the end of 2025 for presentation to the European Commission.
European Central Bank 2025-10-27
European Central Bank clarifies how supervisory guides separate binding rules from expectations and outlines supervision simplification plans
ECB Executive Board member Frank Elderson plans to simplify banking supervision and reporting while maintaining system resilience. Key points include distinguishing between binding obligations, non-binding expectations, and good practices, and reforms to the Supervisory Review and Evaluation Process to reduce complexity and costs. The ECB aims to finalize its Guide on governance and risk culture by 2026, incorporating industry feedback and EBA consultation outcomes.