In a position paper adopted on Thursday 12 March, the EPP group in the European Parliament puts forward measures to strengthen the competitiveness of the European Union’s banking sector, including further development of the banking union and a general simplification of banking prudential rules.
“We need a regulatory reset. The EU banking framework must remain robust, but it also has to become simpler, more proportionate and more predictable”, said the EPP group coordinator for the European Parliament’s Committee on Economic and Monetary Affairs (ECON), Markus Ferber, in a written statement sent to Agence Europe.
The EPP group’s position, which is intended to contribute to the European Commission’s thinking on the competitiveness of the banking sector, calls for legislative initiatives in 2026, to be completed within 18 months.
While Germany remains one of the main obstacles to completing the banking union in the euro area with the creation of a European bank deposit insurance scheme (see EUROPE 13674/22), the EPP group in the European Parliament believes that banking union should be “further developed based on a clear timeline and measurable milestones”. The group does not elaborate further.
It is also in favour of a backstop providing liquidity to the banking sector, “possibly” via the European Stability Mechanism. And, within the framework of current prudential rules, it considers it appropriate to have convergence of supervisory practices to facilitate the circulation of capital within the same group and remove barriers to consolidation in the banking sector.
Simplification. Above all, the Christian Democrat MEPs are advocating a regulatory simplification exercise that goes beyond what the European Commission is already doing (de-prioritisation of 115 Level 2 delegated acts), notably through the presentation, in the first half of 2026, of an ‘omnibus’ legislative package focusing on financial services.
According to the political group, the entire acquis communautaire governing financial services should be streamlined in order to remove obsolete standards, reduce the administrative burden linked in particular to reporting obligations and prevent duplication. The recommendation is for “a moratorium on non-essential (...) rules” that already exist or are still being developed.
In terms of banking supervision, it is necessary to move from a ‘push’ model - where banks automatically transmit a set of data to supervisors - to a ‘pull’ model - where, thanks to new technologies, supervisors have access to granular, non-standardised data via dedicated infrastructures.
Based on the ECB’s proposals (see EUROPE 13772/5), the EPP group advocates a genuine simplification of capital stack requirements. The aim is to reduce the number of regulatory buffers and supervisory add-ons, and create a clearer hierarchy of the remaining requirements.
Proportionality. In the same vein, MEPs want to put in place a regulatory framework calibrated to the size, business model and risk profile of a bank. They point out that applying the ‘Basel Committee’s’ prudential standards to all banks in the EU creates a “structural” competitive disadvantage for small banks.
They therefore suggest a simplified regime for small banking institutions operating in their national market. Instead of capital requirements (Pillar 1), the banks concerned would be subject to “a single, transparent leverage-based requirement” set at a high level to ensure financial stability.
Furthermore, in order to increase financing for the economy and SMEs, the EPP is calling for the prudential rules (SME Supporting Factor) to be changed to reflect the updated definition of mid-caps (see EUROPE 13711/11).
Basel III. Finally, “in light of international developments, we also need to ask ourselves the uncomfortable question if we are transposing the Basel agreement in the right way”, said Mr Ferber.
According to his group, the level of application of the minimum capital threshold (output floor) for banks using an internal model in their calculation of capital requirements should be applied at the consolidated level of a group, contrary to the agreement transposing the ‘Basel III’ standards in the EU (see EUROPE 13210/1). The transitional regulatory allowances for certain exposures (mortgages, loans to SMEs and unrated companies) should also be extended or made permanent.
As for the ‘Fundamental Review of the Trading Book’ (FRTB) approach, the EU should ease or delay the application of its own prudential rules to take account of the delay in adopting specific rules in other jurisdictions, such as the UK and the US (see EUROPE 13748/23).
See the EPP group’s position: https://aeur.eu/f/l6q (Original version in French by Mathieu Bion)