ECB Nears Unveiling of New Banking Rule Simplifications Amid Internal Friction

The European Central Bank is entering the final stretch before announcing a new package of banking rule simplifications, with ECB President Christine Lagarde confirming that the long-awaited review of supervisory regulations has been completed and is set for publication in the coming days.

Speaking before the European Parliament, Lagarde revealed that “next Thursday, Vice President Luis de Guindos will present very specifically — I think there are 15 different areas for which simplifications will be proposed.” She stressed that the effort had been extensive, describing it as “hard work” that ultimately proved “successful” and has already received approval “by the entire Eurosystem at the level of national central banks.”

The review was carried out by a high-level task force led by De Guindos, involving senior figures from several major European central banks. The group’s mandate has been to reduce the regulatory and administrative load that banks have long complained about. Although all participants insist the project does not constitute deregulation, some internal concerns remain that easing certain requirements could unintentionally weaken the resilience of the financial system.

Lagarde noted that the team examined the wide range of capital buffers currently required of European lenders—requirements that she acknowledged are considerably more intricate than those applied internationally. She explained that the review looked closely at ways to streamline these rules, stating, “They looked at simplifying by reducing the number of categories.” The focus, she added, was on assessing the purpose of each capital buffer and potentially “categorizing them into two broad categories.”

Pressure from Abroad Raises Stakes

Regulatory developments outside the EU have also influenced the debate. In both the United States under Donald Trump and in the United Kingdom, authorities are advancing rapidly with efforts to overhaul or loosen certain banking regulations. European policymakers worry that these shifts could leave the continent’s banks at a competitive disadvantage—an argument European institutions have forcefully pushed as they lobby for simplification of post-2008 crisis rules. As a result, the ECB’s internal discussion has concentrated heavily on reducing the sheer volume and complexity of the existing framework.

Lagarde assured MEPs that Parliament would be fully involved once the proposals reach the legislative stage. “In this way, access to finance will be facilitated for small and medium-sized enterprises and also for the banks themselves when they measure risk, when they assess the value of collateral, etc.,” she noted.

Drawing from her role as chair of the European Systemic Risk Board (ESRB), Lagarde also pointed out that the ESRB recently conducted a similar exercise aimed at eliminating unnecessary tasks and making more effective use of its limited resources. According to her, officials determined that “40 of the 90 tasks assigned to the ESRB were not particularly meaningful or were useless and yet were time-consuming.” These findings, she added, will be presented alongside the proposed banking rule simplifications, with hopes that regulators “will approve our proposal to remove, delete and streamline” large parts of the current framework.

Diverging Positions Within the ECB

The upcoming proposals follow weeks of visible tension within the ECB’s supervisory leadership. Just days earlier, Frank Elderson, Vice-Chairman of the ECB Supervisory Board, publicly supported easing certain capital requirements and simplifying the regulatory regime for smaller banks.

Elderson argued in favor of an expanded application of the lighter reporting regime currently available only to very small lenders—those with assets below €5 billion—which must submit just 30% of the data required from larger institutions and are subject to fewer supervisory checks. He also said that the ECB could provide more predictability in its supervisory demands and suggested that the existing nine categories of capital requirements could be streamlined, a position that Lagarde’s remarks also seemed to echo.

However, Claudia Buch, Chair of the ECB’s Supervisory Board, has consistently taken a far more cautious line. Representing the ECB’s most conservative voices, the German economist has repeatedly warned that markets are underestimating geopolitical risks and that nearly all eurozone banks remain exposed to such shocks. Any dilution of supervision or capital demands, she argues, could weaken the long-term resilience of the banking sector and pose broader risks to the stability of the eurozone economy.

In a speech delivered last month, Buch emphasized that existing capital requirements do not hinder bank profitability and insisted that lenders must be adequately protected against highly unpredictable scenarios, particularly at a time when governments have limited room for expansive fiscal interventions. She noted that the ECB is ready to improve efficiency in its supervisory activities and to evaluate the necessity of its procedures, but made clear that such refinements must not lead to softer rules. “We don't need new regulatory frameworks, but we need the commitment of legislators and governments not to weaken the frameworks we already have,” she warned.

The balance between these opposing viewpoints—and how far the ECB is prepared to go in simplifying its rules—will become clear next week, when the new proposals are formally unveiled and scrutinized.

By fLEXI tEAM