Beau: Simplify EU banking supervision for deeper integration
Denis Beau, First Deputy Governor of the BIS, called for an ambitious simplification of EU banking supervision and regulation. He argued that the robust European banking system should now underpin efforts to deepen the Banking Union and enhance competitiveness.
Robustness, but not integration
The European banking system has achieved significant robustness over the past decade, with average CET1 ratios rising from 12.5 percent in 2014 to 16.3 percent in 2025, and non-performing loans falling from 6.5 percent to 1.8 percent.
This resilience allowed the sector to withstand recent shocks, including the Covid-19 crisis and the 2023 banking turmoil.
Despite this strength, banking sector integration within the Euro Area lags expectations.
Cross-border business remains limited, with intra-euro area cross-border lending representing less than 15 percent of total lending to non-banks at end-2024.
Banks continue to operate largely as national entities, hindered by prudential, supervisory, legal, and political frictions.
These factors prevent free capital and liquidity flows and make cross-border activities more costly.
A key issue is EU-specific 'gold-plating' of international standards, resulting in an overly complex framework of prudential requirements, particularly compared to the UK or US.
A call for targeted reforms
A broad agreement has emerged in Europe to reduce undue regulatory and supervisory costs, aiming to incentivize banks to expand support for economic growth.
Recent proposals from the EBA (October 2025) and ECB (December 2025) target regulatory simplification and neutralizing EU-specific 'gold-plating.'
The SSM's 'Next Level Supervision' initiative also contributes.
However, simplification must adhere to strict guardrails: the EU must remain compliant with international standards from Basel and the FSB.
It is also essential to avoid a US-style deregulation playbook, which could hinder corrective action and fragment the Single Market.
Europe should avoid further 'gold-plating' international standards without clear prudential benefits.
Urgency meets complexity
The call for simplification is timely, addressing the persistent fragmentation within the Banking Union despite years of regulatory build-up.
While the principles of upholding international standards and avoiding deregulation are sound, the practical implementation will be a complex political and technical challenge.
Delivering genuine cross-border integration requires more than just streamlining rules; it demands a fundamental shift in supervisory mindset.