Machado backs simpler bank rules without lower capital standards
Pedro Machado, a European Central Bank (ECB) Supervisory Board member, urged simpler, more proportionate banking rules without weaker capital standards. Speaking in Frankfurt, he identified national fragmentation as the main obstacle to competitiveness.
Less reporting for smaller banks
Machado backed expanding the small and non-complex institution category by letting national supervisors raise the asset threshold from €5 billion to €10 billion.
Coverage would rise from more than 1,400 banks to as much as 85 percent of less significant institutions, adding around 150 banks.
From 2027, dedicated FINREP reporting would cut required data points from around 13,500 to roughly 700. Some low-risk banks could undergo a full supervisory review every two to three years; top-down projections would replace most bottom-up stress tests.
The ECB has also halved stress-test data points and is reviewing more than 100 supervisory guides.
Machado supported merging up to nine capital layers into two buffer tiers, releasable and non-releasable.
Capital relief faces an evidence test
Machado said lower capital requirements generate little extra lending outside crises.
During the pandemic, a 1 percentage point release increased lending by around 3 percent.
Applying US rules to euro area banks at end-2025 would raise required minimum Common Equity Tier 1 capital by around 8 percent for the largest banks, but lower it around 5 percent for smaller significant institutions.
The large-bank range ran from just above zero to nearly 17 percent.
He defended the output floor against internal-model risk underestimation.
Integration rather than weaker safeguards
Machado's prescription puts integration ahead of capital relief.
He argued that digitalisation, cybersecurity and artificial intelligence make scale more valuable, supporting cross-border integration and domestic consolidation.
But larger banks must remain resolvable, rather than transferring their risks to taxpayers.
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