European Central Bank (ECB) supervisor Sharon Donnery has emphasized the importance of maintaining robust banking regulations, warning against any dilution of the safeguards established after the global financial crisis. Speaking on April 29, 2025, Donnery acknowledged the potential for simplifying banking rules but stressed that such efforts should not compromise the resilience of the financial system.
The ECB has initiated a task force, led by Vice President Luis de Guindos, to explore ways to streamline banking regulations. Donnery, along with other central bank officials, including Finnish ECB governor Olli Rehn, has underscored that simplification should not equate to deregulation. Rehn highlighted the necessity of maintaining “sturdy” capital buffers to ensure financial stability.
Donnery pointed out that while there is room for more proportionality in the regulatory framework, especially for small and non-complex banks, the core principles of financial resilience must remain intact. She stated, “Rules should be as simple as they can be, but no simpler,” emphasizing the need for clarity without undermining essential protections.
Additionally, Donnery called for clearer guidelines on loss-sharing arrangements in the event of bank failures. She noted that ambiguity in this area could affect investor confidence and the willingness to invest, as understanding the implications of regulatory regimes is crucial for market participants.
The task force’s recommendations will be directed to European lawmakers in Brussels, as the ECB does not have the authority to change banking regulations independently. This initiative follows a letter from central bank governors of Germany, France, Italy, and Spain to the European Commission, advocating for a review of overly complex rules and suggesting potential legislative simplifications.
Donnery’s remarks reflect a cautious approach to regulatory reform, balancing the need for simplification with the imperative to maintain the financial system’s integrity. As the ECB navigates this complex landscape, the focus remains on ensuring that any changes do not erode the hard-won stability achieved in the post-crisis era.
