Bank capital rules do not constrain credit, Buch tells EU lawmakers
ECB Supervisory Board Chair Claudia Buch called for regulatory simplification and completed banking union reforms during a European Parliament hearing on July 2, 2026. She emphasized that bank capital requirements have not constrained lending despite geopolitical and cyber risks.
Capital strength under geopolitical strain
Addressing the ECON committee, Claudia Buch highlighted that euro area banks maintain strong capitalisation and low levels of non-performing loans despite heightened geopolitical conflicts and rising tariffs.
She refuted claims that capital standards impair bank competitiveness or credit supply, noting that higher post-crisis requirements have preserved lending capacity while banks maintain payout ratios of around 50 percent.
Common Equity Tier 1 requirements for 2026 remain broadly aligned with 2019 levels.
However, Buch warned that weaker economic growth could take quarters or years to fully impact asset quality, requiring banks to maintain robust loss-absorbing buffers.
AI adoption and supervisory reform
Technological risks are escalating alongside regulatory updates.
More than 85 percent of supervised banks now use artificial intelligence tools, while frontier large language models present new challenges to cyber defences.
The ECB is reforming its supervisory framework by simplifying macroprudential buffer stacks and implementing a revised Pillar 2 requirement methodology.
Buch stressed that completing the banking union with a European deposit insurance scheme remains essential for cross-border integration.
A familiar refrain on single market friction
Buch rightly defends existing capital buffers, but pushing for regulatory simplification while adding digital oversight creates friction.
Calls to complete the banking union will remain hollow without real political momentum in member states.
European banking will only gain true competitiveness when fragmenting national safeguards finally give way.