The European Central Bank (ECB) has urged European lawmakers to grant it a more significant role in determining banks’ overall capital requirements, including those currently set by national authorities. This push, revealed on Tuesday, aims to identify potential overlaps and blind spots within the current regulatory framework. The recommendation is one of 17 submitted by the eurozone’s central bank to the European Commission as part of a broader consultation designed to help EU banks better compete with their global rivals, particularly those in the United States.
The central bank argued that its policymakers should possess a comprehensive perspective on the total capital demands faced by EU financial institutions. This includes capital requirements stipulated by both ECB supervisors and those falling under the jurisdiction of national authorities. The European Central Bank is the central bank of the 19 European Union countries that have adopted the euro. It is responsible for monetary policy for the eurozone and supervises banks within the region to ensure financial stability. “It is proposed to make the ECB Governing Council responsible for taking a holistic view of the overall level of capital demand within and across the banking union to fulfil the need for increased coordination,” the ECB stated in its submission.
The ECB suggested that this vital assessment should be conducted collaboratively by its policymakers and top supervisors. However, the method by which their findings would be implemented remains unspecified. Beyond the call for greater capital oversight, the central bank reiterated several other key recommendations. These included a proposal to streamline macroprudential buffers down to just two, a clarification regarding the status of convertible bonds, and an expansion of a favourable regulatory regime specifically tailored for smaller banks across the union.
