ECB calls for simpler EU bank rules to lift competitiveness

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ECB on EU bank rules

Highlights

ECB Vice-President Boris Vujčić advocated simplifying EU bank rules, including merging capital buffers and creating a proportionate regime for smaller banks, in a 2 October 2026 speech.
Vujčić emphasized that current capital requirements are not a disadvantage and that improved capital ratios and return on equity reflect sector resilience, not regulatory burdens.
He identified deeper financial integration and completion of the banking union as main drivers for EU banking competitiveness, outweighing the effects of existing regulations.

ECB proposals for simpler bank regulation

As reported by European Central Bank, citing a keynote speech by ECB Vice-President Boris Vujčić at the European Systemic Risk Board's annual conference in Frankfurt am Main on 2 October 2026, the central bank is making the case for simplifying the EU's regulatory, supervisory and reporting frameworks for banks. The argument is that resilience does not require unnecessarily complex rules, even as strong capital positions remain essential to limit the economic damage from financial crises.

Vujčić says the ECB Governing Council put forward high-level recommendations at the end of last year to reduce complexity in bank regulation. These include merging existing capital buffers into a non-releasable buffer and a releasable buffer, simplifying the leverage ratio framework, aligning the frameworks for MREL and TLAC more closely, and creating a more proportionate dedicated regime for smaller banks.

He also says the Eurosystem responded to the European Commission's consultation on the competitiveness of the EU banking sector, and welcomes the Commission's subsequent communication on banking competitiveness and the Single Market. In parallel, the ECB's supervisory arm is pursuing simplification measures intended to make supervision more efficient and more focused on risk.

Integration seen as main driver of competitiveness

Vujčić says the current level of bank capital requirements is not a competitive disadvantage for European banks, arguing that the sector's resilience is instead a source of strength for the euro area and the broader EU economy. He says lending trends reflect credit demand, elevated uncertainty and wider macroeconomic conditions, rather than a shortage of capital caused by regulation.

According to the speech, euro area bank capital ratios have risen steadily since the global financial crisis, while return on equity has improved since the pandemic alongside the normalization of monetary policy. Better-capitalized banks also tend to face lower equity costs, reinforcing the ECB's position that sound balance sheets support rather than weaken long-term competitiveness.

Vujčić says the biggest boost to European banking competitiveness would come from deeper financial integration. In his view, only a genuine Single Market and a complete banking union can reduce fragmentation and allow EU banks to achieve greater scale, investment capacity and operating efficiency.

Our earlier coverage of the ECB’s call for simpler bank rules explained why the central bank favors streamlining the prudential framework without lowering capital requirements. We noted that the ECB sees current capital standards as a competitive strength for European lenders and has floated measures such as merging buffers into releasable and non-releasable categories and creating a lighter, more proportionate regime for smaller banks.

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