Paris: Europe’s banking supervisor wants to make its own rulebook easier to read. The European Banking Authority, headquartered in the French capital, has opened a push to simplify the dense web of prudential and resolution requirements that governs how much capital lenders must hold and how they would be wound down in a crisis.
The authority set out its thinking in a review published in mid-June, arguing that years of patches have left the capital rules tangled without making banks measurably safer. Its central target is the so-called stacking order, the layered sequence of minimum requirements, buffers and add-ons that supervisors pile on top of one another. Firms complain the structure has grown so intricate that even specialists struggle to trace how a single euro of capital is counted.
The EBA insists that simpler does not mean weaker. Officials framed the exercise as stripping out complexity that adds compliance cost without adding resilience, while preserving the buffers that let a bank absorb losses and, if necessary, fail without a taxpayer rescue. The pitch lands at a moment when European lenders and their political backers argue that heavy regulation blunts the bloc’s competitiveness against American rivals.
To gather evidence, the authority launched several consultations with responses due on 12 August, giving banks, investors and consumer advocates a narrow window to weigh in. The tight deadline signals that the EBA wants to move quickly, folding the feedback into technical standards that would then pass to the Commission for adoption.
Not everyone welcomes the direction. Some analysts worry that a drive for simplicity, arriving alongside broader deregulatory pressure, could become a cover for softening standards built painstakingly after the last financial crisis. They point out that the capital rules grew complicated precisely because banks and their balance sheets are complicated, and that crude simplification can hide risk rather than remove it.
The authority has tried to answer that critique by separating the plumbing from the substance. Cleaner reporting templates and a tidier stacking order, it argues, change how requirements are expressed, not how much capital banks ultimately hold. Whether markets accept that distinction will become clear once the detailed proposals appear.
Parallel work is under way on the reporting framework itself, where the EBA has drafted an updated technical package covering new disclosures on environmental risk and other exposures. Taken together, the two strands point to an agency trying to lighten the administrative load while defending the post-crisis settlement. Its running list of proposals sits on the EBA press page.
The consultation deadline this week marks only the first step. Banks will study the eventual standards line by line, and the argument over where simplification ends and deregulation begins is unlikely to fade before the rules take final shape.
