Elderson: Simplify, don't deregulate; warns of AI cyber risks

Frank Elderson, Member of the Executive Board of the ECB, discussed regulatory simplification, banking sector competitiveness, and operational resilience. He emphasized distinguishing simplification from deregulation and highlighted the growing threat of AI-enabled cyberattacks.

SSM streamlines supervision, defends resilience

The debate on simplifying the regulatory and supervisory framework is intense, with recommendations from a High-Level Task Force and a European Commission consultation.

Frank Elderson emphasized the distinction: simplification maintains resilience, while deregulation weakens it.

The Single Supervisory Mechanism (SSM) has launched "next-level supervision" to tackle complexities without compromising stability.

These reforms, requiring no legislative changes, are yielding tangible results.

In Q1 2026, 80 percent of simple capital-related decisions were approved within one week, down from months.

A new fast-track for simple securitisations cut approval times from three months to less than ten working days.

The SSM is also reviewing nearly a hundred supervisory guides to streamline and consolidate them.

In stress testing, the SSM collaborated with the EBA to introduce simpler templates, aiming to reduce required data points by 55 percent and lower compliance costs.

Integration key to EU competitiveness

Europe faces vast financing needs, estimated at €1.2 trillion annually for green, digital, and defence goals.

Elderson stressed that strengthening competitiveness hinges on greater integration, as Europe still lacks truly integrated banking markets.

Around 80 percent of bank lending remains domestic, and cross-border merger activity has sharply declined.

This fragmentation prevents banks from achieving scale and efficiency.

A serious competitiveness agenda requires a time-bound roadmap to complete the Single Market, ensuring the euro area functions as a single jurisdiction for financial regulation.

Synchronized progress on core Banking Union elements, particularly a European Deposit Insurance Scheme, alongside deeper capital markets, is essential.

Ultimately, revitalizing competitiveness means strengthening the real economy and financial architecture in tandem.

AI turbocharges cyber threat

The advent of frontier AI models fundamentally transforms the cyber threat landscape, enabling faster and more sophisticated attacks.

Banks must prioritize multi-year investments in operational resilience, with management taking clear ownership of this strategic challenge.

Supervisors are actively engaging, but continuous effort from institutions is paramount to maintain stability.