Buch rejects bank capital cuts, streamlines supervisory reporting
ECB Supervisory Board Chair Claudia Buch rejected calls to loosen bank capital requirements at the Bruegel Annual Meetings in Brussels. She stated that aggregate Common Equity Tier 1 ratios of 16 percent do not constrain credit supply, while detailing plans to cut supervisory burdens.
Capital buffers exceed lending demand
European Central Bank (ECB) Supervisory Board Chair Claudia Buch argued that lowering bank capital requirements will not stimulate economic expansion.
Directly supervised banks hold an aggregate Common Equity Tier 1 ratio of around 16 percent, well above regulatory minimums.
Buch noted that banks have increased distributions via dividends and share buybacks, demonstrating that capital does not constrain lending.
“Sustainable growth and resilience are, in fact, two sides of the same coin,” Buch said.
She emphasized that weakening the leverage ratio or output floor would raise system fragility and risk diverting capital into shareholder payouts rather than essential IT and cybersecurity investments.
Fewer data points and faster approvals
To reduce administrative friction, the ECB is discontinuing around 40 of its 100 supervisory guidance documents and introducing one-week fast-track approvals for standard capital transactions.
The supervisor also agreed with the European Banking Authority to halve the reported data points in the next EU-wide stress test, alongside a 20 percent cut in bank-specific reporting.
Furthermore, Buch advocated for completing the European banking union, highlighting that less than 2 percent of household deposits are held across borders due to regulatory fragmentation.
Pragmatic cleanup, firm boundaries
Buch draws a clear line between regulatory simplification and outright deregulation.
Cutting redundant reporting obligations provides tangible relief without eroding the post-crisis capital fortress.
Yet without political momentum on cross-border deposit insurance, Europe's banking market will remain stubbornly divided.