On Tuesday 14 April, the ECB’s Governing Council presented its recommendations for making the European Union’s banking sector more competitive, while at the same time guaranteeing the solidity it acquired after the 2008 financial crisis.
Building on its specific proposals made at the end of 2025 (see EUROPE 13772/5), the EU institution reiterated its position that the level of regulatory capital, “comparable” to that imposed by other international jurisdictions, is adequate and does not act as a brake on the financing of the economy. It therefore rejects any weakening of the rules relating to the level of application of the minimum capital threshold for banks using an internal model (‘output floor’), as well as the prudential treatment of non-performing bank loans.
“Competitiveness arise from harmonisation, integration and scale, not from deregulation. Competitiveness is now being held back by unnecessary complexity and cross-country fragmentation”, stressed the ECB. It advocates for the emergence of a genuine single banking market in the euro area, where liquidity could circulate freely within a cross-border financial group and where individual savings would be protected in a uniform manner.
On this point, the Governing Council is calling for progress on banking union in the euro area, with the setting of a “precise timetable” for the creation of a European banking deposit insurance scheme.
The ECB is not opposed to simplifying the regulatory framework, provided this does not lead to a weakening of prudential rules. In particular, it supports the idea of reducing to two the levels of capital reserves (releasable and non-releasable reserves), and to two the regulatory framework governing the leverage ratio. The rules applicable to small, non-systemic banking institutions could be more proportionate according to their risk exposure.
See the proposals of the Governing Council: https://aeur.eu/f/lkv (Original version in French by Mathieu Bion)