Elderson: Deregulation is 'no-go', integration is key

ECB Executive Board Member Frank Elderson emphasized that deregulation, even framed as modernisation or simplification, is 'a no-go' for financial supervision.

He stressed that the lessons of the financial crisis must not be forgotten and highlighted that supervisors must focus beyond purely financial risks.

Elderson pointed to the collapse of Amsterdam Trade Bank as a clear example where non-financial risks were excellent predictors of future financial problems, often manifesting too late.

He reiterated that a well-capitalised banking sector does not constrain lending to the real economy, citing ECB research.

Elderson argued that the single European market is not truly single due to trapped capital and liquidity within national borders, advocating for integration through a genuine single market, a European deposit insurance scheme, and a capital markets union.

He noted that resisting cross-border mergers undermines the goal of a single market.

Elderson clarified that the ECB's concept of simplification involves streamlining its own supervisory processes, not reducing capital requirements.

For instance, the annual supervisory review for significant banks (currently 111) is being adapted; not every risk area is scrutinised for every institution each year if no significant findings have emerged, allowing for reduced review frequency.

The ECB is also reviewing nearly a hundred publications of supervisory expectations, aiming to streamline, shorten, consolidate, or retire them.

The approval process for securitisations has been reduced from three months to seven days for those meeting simple, transparent criteria.

This frees up resources to deploy where they matter most, reflecting a fundamental cultural shift towards smarter, prioritised supervision.