FRANKFURT (Reuters) -European Central Bank supervisor Frank Elderson on Friday backed simplifying rules for smaller lenders and capital requirements for the sector as a whole.
The ECB is drafting proposals to whittle down regulation in the European Union, responding to banks’ complaints that they are at a disadvantage to their U.S. peers, also due to U.S. President Donald Trump’s deregulation drive.
Elderson proposed expanding a regime currently reserved for the region’s tiniest and simplest institutions, which requires them to report just 30% of the data that larger banks must produce. Those lenders are also subject to fewer inspections from supervisors.
“One could consider a more systematic application of this regime, as well as an increased scope,” the Dutch legal expert told an ECB conference.
He added this could be done within the existing rulebook, maintaining a framework in which assets are weighed based on their risk.
Speaking later at the same event, chief ECB supervisor Claudia Buch said international banking rules should be applied to all banks “but with a lot of proportionality”.
The ECB will publish its proposals next month.
ECB COULD MAKE ITS REQUIREMENTS MORE PREDICTABLE
The Small and Non-Complex Institution regime is currently applied to banks with assets of less than 5 billion euros ($5.83 billion), a small trading book and little exposure to derivatives, among other criteria.
Germany, where regional and smaller lenders still make up nearly half of total assets, has been lobbying to create an entirely separate regime for smaller banks, something that would require difficult-to-pass changes to EU legislation.
Elderson said the ECB could make its requirements more predictable and that there was scope for making the capital stack, which is currently comprised of nine layers, simpler.
In cases of failure, France has proposed subjecting Europe’s biggest banks to a single buffer, rather than the current two.
The ECB proposals are part of a broader simplification initiative being carried out by the European Commission. An ECB task force will consider all proposals before making its recommendations to the Commission by the end of the year.
($1 = 0.8575 euros)
(Reporting by Francesco Canepa; Editing by Sharon Singleton and Joe Bavier)
