Donnery rejects capital dilution and demands better bank risk data
European Central Bank (ECB) Supervisory Board member Sharon Donnery ruled out diluting prudential standards amid supervisory simplification. In a September 30, 2026 interview, she described capital strength as essential for competitiveness and pressed banks on risk data governance.
Targeted scrutiny over regulatory relief
Donnery stressed that streamlining supervision through the review of more than 100 publications does not mean diluting capital standards.
The ongoing reform of the Supervisory Review and Evaluation Process focuses on bank-specific risks rather than generalized loosening or tightening of Pillar 2 requirements.
Persistent failures in risk data aggregation remain a critical concern, with supervisors demanding tangible compliance with Basel principles.
On the digital euro, Donnery noted that implementation costs for euro area banks are estimated at €4 billion to €5.8 billion, though holding limits and reverse waterfall functions will prevent disintermediation and deposit flight.
Shadow banking links and market fragmentation
Addressing broader financial stability risks, Donnery pointed to the non-bank financial sector, which now accounts for roughly half of global financial assets and presents contagion channels through credit lines and margin calls.
She highlighted Single Market fragmentation, citing IMF findings that barriers equal a 110 percent tariff on services.
To overcome ring-fencing, she urged completion of the banking union through a common deposit insurance scheme and unified crisis management rules.
Prudence without enforcement
The ECB rightly pairs process streamlining with unyielding capital standards.
Yet repeated warnings on risk data without direct penalties will fail to shift bank behavior.
True banking integration remains an illusion until member states finally deliver common deposit insurance.
Source: Sharon Donnery: Interview with banko.ro
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