The European Central Bank (ECB) on Thursday proposed simplifying requirements for banks in the European Union (EU) in order to enhance their competitiveness on the global stage.
As the administration of U.S. President Donald Trump seeks to ease regulations for banks operating in the world’s largest economy, the EU is under pressure to relax its own complex regulatory framework amid concerns that European banks may find it even harder to compete with U.S. financial institutions.
ECB Vice President Luis de Guindos stated that the proposals, which will be submitted to the European Commission for consideration, aim to create a more streamlined regulatory environment and reduce unnecessary burdens.
“These efforts to simplify requirements should preserve banks’ resilience. And by resilience, we mean capital levels,” de Guindos said during a briefing.
One of the ECB’s key proposals is to simplify the current rules governing bank capital requirements
— rules that were introduced in the aftermath of the 2008–2009 global financial crisis.
The ECB suggests merging several types of capital buffers that banks are currently required to maintain, reducing them to two categories. Moreover, these requirements would be further relaxed for smaller banks.
The central bank also proposes simplifying the EU-wide so-called stress tests by streamlining their methodology and scope, making their results more useful both for the banking system as a whole and for individual institutions.
Additionally, the ECB calls for the completion of the banking union and the capital markets union in order to foster cross-border integration and improve capital market efficiency.
Read also: Le Pen criticizes European defense programs – France must strengthen its own