EU Central Bankers Call for Simplified Banking Regulations

Four leading central bankers from the European Union have urged regulators to streamline banking rules, calling for a thorough review to ensure fair competition with global financial institutions.

In a letter addressed to the European Commission, the heads of the central banks of Spain, Germany, Italy, and France requested a "comprehensive analysis" of existing regulations. They contended that such a review would help establish a "level playing field" with international competitors.

The letter, initially reported by Bloomberg, comes amid mounting concerns that the complexity of European banking regulations places its financial institutions at a disadvantage. While the governors did not advocate for deregulation, their appeal may lend support to politicians who argue that excessive rules are hindering economic growth.

"We believe that the priority should now be to develop a holistic assessment of the rules that apply to European banks," wrote José Luis Escrivá, Joachim Nagel, Fabio Panetta, and François Villeroy de Galhau.

A spokesperson for the European Commission confirmed receipt of the letter but declined to provide further comment. Similarly, the central banks of Spain, Germany, Italy, and France refrained from issuing statements regarding the request.

The governors cautioned that current regulations contribute to "competitive distortions at [the] international level" without necessarily enhancing financial stability. They also pointed to concerns regarding level 2 and level 3 regulatory standards, which are set by supervisory bodies rather than legislators, potentially adding unnecessary complexity to the regulatory framework.

The letter emphasized that the review should encompass microprudential, macroprudential, and resolution frameworks while also considering additional regulatory initiatives that might threaten stability and predictability.

Bloomberg previously reported that Germany, France, and Italy have intensified their calls for a prompt review of Europe's banking sector. Commercial lenders have taken an even stronger stance, with some industry groups advocating for a "moratorium" on the introduction of new regulations.

Jonathan Hill, a former EU commissioner, noted that shifting economic pressures are influencing the regulatory debate. "Attitudes toward risk are shifting quite fast in individual countries," he observed. However, he also pointed out that Europe remains more cautious when it comes to modifying regulations.

The central bankers maintained that simplifying banking rules would ultimately reinforce financial stability. "A clear, predictable, and proportionate regulatory framework" is essential for effective banking oversight, they stated in their letter.

By fLEXI tEAM