ECB's Donnery warns against watering down banking rules

RTÉ News​

29-04-2025

European Central Bank supervisor Sharon Donnery said today she saw scope for making banking regulation simpler, but warned against watering it down.
The ECB has launched a task force, chaired by Vice President Luis de Guindos, that will look for ways of simplifying bank rules.
Sharon Donnery is the third central bank representative this week to stress this should not amount to deregulation.
"We must never sacrifice the resilience that was so hard-won in the aftermath of the global financial crisis - neither in the name of alleged competitiveness, nor under the banner of simplification," she said. "This is a red line. And it must remain one."
De Guindos struck a similar tone in the European Parliament yesterday and Finnish ECB governor Olli Rehn, also a member of the task force, said banks should maintain "sturdy" capital buffers.
Sharon Donnery stressed the regulatory framework was already less strict for "small and non-complex" banks although she saw scope for "more proportionality".
"There may be scope for more proportionality in the European regulatory framework," she said. "But let me reiterate: rules should be as simple as they can be, but no simpler."
Ms Donnery also said the regulation should be clearer about which investors bear losses when a bank goes under.
"Market participants' ability to understand the consequences of the regulatory regime - for instance with regard to loss-sharing arrangements and supervisory restrictions when a bank's solvency declines - can affect their willingness to invest," she said.
"And even in normal times, monitoring compliance with multiple regulatory metrics and understanding all their potential interactions can pose operational costs and challenges for banks and supervisors alike," she added.