On 11 December 2025, the European Central Bank (ECB) Governing Council endorsed recommendations from its High-Level Task Force on Simplification, aimed at streamlining EU banking regulation, supervision, and reporting while maintaining financial resilience. These proposals will now be submitted to the European Commission.
Key measures include:
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Simplified capital requirements: Merging existing capital buffers into two (releasable and non-releasable) and reducing the leverage ratio framework from four elements to two, improving proportionality, especially for smaller banks. Additional Tier 1 capital may be enhanced to absorb losses under normal conditions.
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Greater proportionality: Expanding the small banks regime to include more institutions, applying simplified rules in a harmonised and prudent manner.
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Macroprudential and resolution frameworks: Automatic reciprocation of macroprudential measures, alignment of resolution requirements with global standards, and improved predictability.
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Harmonisation and supervision: Shifting rules from directives to regulations, completing the Single Rulebook, harmonising licensing, governance, and related-party transactions, and granting supervisors more flexibility in reviewing internal models.
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Stress testing and holistic capital oversight: Streamlining EU-wide stress tests, with results aiding coordination between macro- and microprudential buffers. The Governing Council may take a holistic view of overall capital and cross-country differences through an expanded Macroprudential Forum.
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Reporting simplification: Wider data sharing among authorities, integrated reporting to avoid duplicate submissions, periodic review of reporting requirements, and consolidation of supervisory and disclosure data.
The proposals aim to reduce complexity, foster cross-border integration, and improve efficiency in capital markets while ensuring full compliance with Basel III and maintaining system resilience. The ECB will present these recommendations to the European Commission, which will issue its report on the EU banking system in 2026.
Additionally, the ECB published a complementary report, “Streamlining supervision, safeguarding resilience”, outlining ongoing supervisory initiatives to improve effectiveness and risk focus, which can be implemented independently of the Governing Council’s recommendations.
