European Central Bank Vice-President Boris Vujčić has called for a significant simplification of the EU's banking regulatory framework, arguing that the current rules have become unnecessarily complex and burdensome — while insisting that reducing complexity need not come at the cost of financial resilience. He delivered his remarks as a keynote address at the tenth annual conference of the European Systemic Risk Board (ESRB), which this year marks its 15th anniversary.
Vujčić pushed back against the banking industry's argument that capital requirements are constraining credit provision and that lowering them would make European banks more competitive. Banks with stronger balance sheets entering the global financial crisis, he said, would have significantly reduced its economic costs. He put the median fiscal cost of a banking crisis at around 7% of GDP for advanced economies — a figure that, he noted, captures only part of the broader damage, which also includes persistent losses in output, employment and investment.
At the same time, Vujčić acknowledged that the same level of resilience can, in many cases, be achieved with simpler rules, and that compliance with EU requirements has grown "increasingly complicated and burdensome." The ECB's Governing Council late last year put forward a set of high-level recommendations to address this. These include merging the existing capital buffers into two — a non-releasable buffer combining the capital conservation buffer and the G-SII/O-SII buffer, and a releasable buffer combining the countercyclical capital buffer and the systemic risk buffer. On the leverage ratio, the proposal would reduce the capital stack from four elements to two: a 3% minimum requirement and a single leverage ratio buffer.
On resolution, the ECB proposed more closely aligning the MREL and TLAC frameworks, bringing requirements for all EU banks closer to those applied to global systemically important banks under the international TLAC standard. The ECB also recommended a dedicated, simpler regime for smaller banks, calibrated more conservatively to preserve resilience, building on the existing regime for small and non-complex institutions.
On the supervisory side, the ECB's supervisory arm is pursuing parallel simplification measures, including streamlining guidance documents and discontinuing around 40 out of more than 100 existing guidance documents. The ECB also responded to the European Commission's consultation on banking sector competitiveness; the Commission has since published a Communication on the competitiveness of the banking sector and the Single Market in banking, which Vujčić said the ECB "very much welcomes."
Vujčić argued that financial integration within a genuine Single Market fosters economies of scale and ultimately drives the competitiveness of EU banks.
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