Simplification of the prudential, supervisory and reporting framework

European Central Bank (ECB)

The European Central Bank (ECB) has endorsed recommendations to simplify the prudential, supervisory, and reporting framework for EU banks. The recommendations include 17 measures aimed at reducing complexity and administrative burdens, while preserving the sector’s resilience and the effectiveness of supervision. The prudential framework, supervisory approach and reporting requirements are addressed comprehensively, with proposals aimed at eliminating duplication, clarifying requirements and strengthening proportionality.


Recommendations on simplification of the prudential, supervisory and reporting framework

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Executive summary

The document organizes recommendations into three main areas. First, it proposes simplifying the prudential framework, with measures such as streamlining capital structures and leverage ratios, reviewing the role of certain capital instruments in a going-concern context, and prudently extending the simplified regime for small and non-complex institutions. Second, it promotes less prescriptive and more risk-based supervision, adjusting processes and frequencies to materiality and risk profile. Third, it proposes simplifying reporting with more consistent and integrated data requests, fewer resubmissions and a reduced operational burden.

Progress is expected to be made through coordinated impact assessments, the development of proposals within the European Commission framework, and the implementation of reporting measures based on ongoing initiatives by the European Banking Authority, the ECB, and the Joint Banking Reporting Committee.

Main content

Proposals to simplify the regulatory framework (Recommendations 1–9):

  • Recommendation 1. Simplification of capital stacks and the leverage ratio. 
  • Recommendation 2. Improving the quality of capital in a going-concern situation. 
  • Recommendation 3. Prudent expansion of the simplified regime. 
  • Recommendation 4. Automatic reciprocity measures up to a certain threshold, combined with a more standardized application of macroprudential tools. 
  • Recommendation 5. Alignment of minimum requirements for own funds and eligible liabilities (MREL) with the total loss-absorbing capacity (TLAC) frameworks. 
  • Recommendation 6. Increased use of regulations versus directives and streamlining of Level 2 and Level 3 acts. 
  • Recommendation 7. Simplification of the EU-wide stress test methodology. 
  • Recommendation 8. The EC Governing Council responsible for adopting a holistic view of the overall level of capital in the banking union.
  • Recommendation 9. Finalization of the savings and investment union, including completion of the banking union, to reduce national fragmentation and allow for more efficient capital markets. 

Proposals to simplify the supervisory framework (Recommendations 10–11):

  • Recommendation 10. Strengthening and completing the Single Rulebook to simplify and harmonize supervisory practices and help deepen the internal market in banking. 
  • Recommendation 11. Reconsidering the level of prescriptiveness of legislation governing supervisory processes to identify areas where more risk-based approaches can be implemented. 

Proposals to simplify the reporting framework (Recommendations 12–17):

  • Recommendation 12. Stepping up coordination and data sharing among key stakeholders to avoid redundancy in data requests. 
  • Recommendation 13. Promoting an integrated reporting system with a single granular data set. 
  • Recommendation 14. Defining materiality thresholds and supervisory tolerance margins for minor errors. 
  • Recommendation 15. Publishing a public inventory of non-market-sensitive reporting requirements. 
  • Recommendation 16. Introducing periodic reviews to remove redundant or obsolete reporting obligations. 
  • Recommendation 17. Reforming Pillar 3 public disclosure to eliminate the double transmission of data. 

Download the technical note on the Recommendations on simplification of the prudential, supervisory and reporting framework (also available in Spanish).