ECB launches new task force to simplify banking regulation
The ECB's task force included central bank governors from Germany, France, and Italy, as concerns mounted over the region's decline. (Reuters pic)
BRUSSELS : The European Central Bank has convened a task force led by some of its most powerful governors aimed at simplifying banking regulation, amid growing fears the region is falling behind.
The central bank governors of Germany, France and Italy are among the key figures in the newly-convened group, as is the governor of the Bank of Finland, who's also the first vice chair of Europe's Systemic Risk Board, according to people familiar with the matter asking not to be identified as the information is private.
The issue is likely to stoke internal tensions with the ECB's supervisory arm, which is helmed by a separate set of officials who regard banking regulation as their territory and are staunch defenders of Europe's high regulatory standards against the wave of global rollback sparked by the Trump administration, two of the people said.
The ECB declined to comment, as did representatives for Germany's Bundesbank, the Bank of France, the Bank of Italy and the Bank of Finland.
The task force's creation follows a controversial letter from the central bank governors of Germany, France, Italy and Spain to the European Commission earlier this year, directly arguing for a 'comprehensive assessment' of Europe's banking rules to ensure a 'level playing field' with other major jurisdictions.
The lobby for Europe's banking sector, whose profitability and valuation has long lagged US rivals, had been advancing similar calls.
The quartet's appeal had unsettled some governing council peers who balked at the precedent of a subset of governors asking the commission to intervene in something that was a core competence of the ECB, other people familiar with the situation said.
One official told Bloomberg he was concerned the simplification pursued by governors could be hijacked by politicians who want to deregulate banks in order to boost Europe's growth.
The task force's remit and time line are unclear. The work could focus on the reporting banks need to do on their business or the governors could take a broader view than just the ECB's supervisory remit, by focusing on how European banking rules are transposed into the mass of rules that lenders have to comply with, and the broader regulatory framework, according to some of the people.
The ECB has already begun simplifying some of its processes, including bank capital model approvals, while the European Banking Authority, which transposes regulations to day-to-day standards, has also claimed 'significant progress' in simplifying standards. The EU has also accelerated a planned review of its banking framework from 2028 to 2026.
Still, other jurisdictions have moved much faster. The US Consumer Financial Protection Bureau has committed to halving its supervisory interventions, while other agencies have already pared back some rules and promised to go further.
In the UK, regulators have announced more than a dozen industry-friendly rule changes this year, including a 70% cut in the red tape associated with capital requirements and less frequent stress tests.
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