Lower capital requirements will not boost lending, Vujčić says
ECB Vice-President Boris Vujčić rejected industry calls to lower bank capital requirements, arguing that regulatory capital does not constrain lending. Speaking at the ESRB annual conference on October 2, 2026, he urged cross-border integration and rule simplification instead.
Two buffers instead of four
Euro area bank capital positions have strengthened since the financial crisis, with the median Tier 1 ratio rising from 8 percent in 2009 to over 16 percent today, while price-to-book ratios average 1.5. Vujčić noted that bank profitability reached historical highs in the second quarter of 2026.
Consequently, regulatory capital is not a binding constraint on lending; subdued credit reflects weak demand and economic uncertainty.
To ease burdens without reducing resilience, the ECB proposes merging the capital stack into two buffers: non-releasable and releasable.
The framework also cuts leverage ratio components from four to two, aligns MREL with TLAC, and retires 40 supervisory guidance documents.
The sixteen percent hurdle
Financial fragmentation continues to restrict European banking scale.
Cross-border corporate lending within the euro area accounts for only 16 percent of total corporate loans, below the 20 percent directed outside the union.
Mergers remain largely domestic, leaving EU banks trailing US peers in investment banking.
Vujčić stressed that competitiveness requires establishing a European deposit insurance scheme, developing funded pensions, and harmonizing 27 divergent national tax and insolvency regimes.
Integration beats deregulation
Vujčić rightly resists bank lobbying for capital relief given current record profitability.
Yet banking on cross-border integration ignores years of political deadlock over deposit insurance.
Streamlining technical rules helps, but European banking scale remains stuck in national silos.