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Regulatory simplification and diversity of the banking sector

Regulatory simplification and diversity of the banking sector

Context

Over the past decade, the EU banking regulatory and supervisory framework has been significantly strengthened, contributing to a more resilient, well-capitalised and closely supervised banking sector.

However, the progressive accumulation of prudential requirements, supervisory expectations and reporting obligations has led to increasing complexity and compliance costs for banks. This growing “layering” of rules, across different regulatory levels and national practices, raises concerns about operational efficiency, transparency and the overall effectiveness and readability of the framework.

In this context, simplifying the regulatory and supervisory framework has become a key policy priority. The objective is not to weaken prudential safeguards, but to reduce unnecessary complexity, improve coherence across requirements and enhance the usability of the framework, while preserving financial stability, supervisory effectiveness and the integrity of the Single Rulebook.

At the same time, the EU banking sector is characterised by a high degree of diversity in terms of size, ownership structures, business models and risk profiles, including regional and cooperative banks, large cross-border groups and digital players. This diversity of banking models enables the financial system to serve a wide range of economic actors, business models and territories, ensuring access to financial services across regions and client segments.

Applying proportionality in practice nevertheless raises important trade-offs. While it can help reduce undue regulatory burdens and better align requirements with risks, it must avoid creating fragmentation, weakening supervisory consistency or distorting competition across the Single Market.

Against this backdrop, policymakers and supervisors are now focusing on identifying where complexity no longer delivers clear prudential benefits, and where simplification can be pursued without weakening resilience or creating new sources of fragmentation

Eurofi documents

Extracted from the main Eurofi publications (Regulatory Updates, Views Magazines and Conference Summaries)

Regulatory Update

Eurofi policy note

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Summary

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Views The Eurofi Magazine

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Key contributions

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