He European Central Bank (ECB) has just published its recommendation in favor of banking simplification, a document in which it proposes reducing the number of capital buffers required of banks and more advantageous regulation for small entities. The work, directed by vice-president of the organization, the Spaniard Luis de Guindosaims to reduce the regulatory burden. “The objective has been to identify excessive complexities within the European framework of regulation, supervision and presentation reports which could unnecessarily hamper the competitiveness of euro area banks and impose an excessive burden on them, which could affect their ability to provide services to the real economy”, they specify.
After detecting that the number of elements in the capital structure weighted by risk and the debt ratio exceeds those provided for by Basel, “a factor which could cause overlaps and inconsistencies”, the organization put on the table the possibility of reducing the buffers of the banking requirements: what we call P2Gwhich is a specific recommendation to each bank based on the capital it must maintain in the event of a crisis; a non-releasable capital cushion and another to be released in the event of financial stress.
The ECB considers that the diversity of capital elements currently in force in the EU may reduce transparency and increase uncertainty, as entities face greater difficulties when assessing factors such as capital, the level of requirements and the available capital margin. compared to other countries like the United Kingdom and the United States United, where it is inferior. In this sense, De Guindos defended that the intention of this proposal is to achieve the same level of resilience, but in a simpler way and that this measure represents an advantage for the Eurozone, which was not affected by the regional banking crisis of 2023 in The United States or the bankruptcy of Credit Suisse.
Focuses on small banks
At the same time, the ECB supports the “significant” increase in the rate proportionality of EU banking rulesby extending the regime that currently applies to small entities to a larger number of entities and simplifying the applicable rules in a prudent and harmonized manner. In this regard, he proposes extending to a greater number of banks the regime currently applied to small banks whose balance sheet is less than 5 billion euros and limited trading activitiesas well as simplifying the stress test – known as stress testing – at EU level so that its results are more useful.
Likewise, the ECB proposes the introduction of a specific and simpler regime for small banks, and which the authorities share their data among themselves, which could be done through the Joint Committee banking information. All of these reporting requirements could be reviewed every three to five years to ensure they remain necessary. “We should have a special, let’s say, simpler framework for small banks,” Guindos emphasized with regard to both capital structure and supervision, but this is different from what is happening. implemented in the United States, which has specific regulations for small and medium-sized banks. In any case, he recalled that it will be the European Commission, the Parliament and the European Council which will “set” the limit.
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