EBA Chair Urges Banks to Lend More While Signaling Regulatory Simplification and Coherence

Key Takeaways

• In an Irish Independent interview, EBA Chair François-Louis Michaud argued that well-capitalized European banks should be less cautious about lending.
• He ruled out framing the debate as one of lower capital requirements and pointed instead to a more coherent, simplified, and predictable rulebook.
• Compliance teams should treat this as a directional signal rather than binding guidance, since it previews supervisory priorities on simplification, climate risk, ICT resilience, and the Savings and Investments Union.

Deep Dive

This is an interview, not a rulemaking, and it introduces no new requirements, deadlines, or obligations. Despite the "Guidance" classification, it carries no legal force. Its value lies in showing how the EBA Chair is thinking about the policy direction as the Irish Presidency of the Council of the EU begins and as the European Commission's report on banking competitiveness is debated. Compliance teams should read it as a signal of supervisory tone and likely future legislative and supervisory priorities.

The key messages are as follows. First, Michaud rejected the idea of releasing capital. He said the real question is how much capital the system needs and for what purpose, and he stressed that strong capital positions remain essential given digital transformation, cybersecurity, and resilience needs. Second, he called for greater regulatory clarity and predictability so banks can deploy capital with confidence, and said the framework should encourage prudent risk-taking. Third, he said the interaction of microprudential supervision, macroprudential policy, and resolution frameworks should be reviewed holistically. He also said there is growing scope to streamline reporting and compliance requirements without compromising resilience. Fourth, he supported progress on securitization as a way to expand bank lending capacity within the Savings and Investments Union, and he encouraged cross-border banking and consolidation within the Single Market.

On risk topics, Michaud described AI, digitalization, and cybersecurity as among the most significant risks facing the sector. He highlighted DORA's requirements to map and monitor critical ICT providers and the direct EU oversight of systemic third-party providers. On climate risk, he said it remains on the supervisory agenda but that the emphasis is shifting toward banks integrating it into their own risk management rather than relying solely on detailed regulatory requirements. This implies greater institutional responsibility and potentially less prescriptive rules, and supervisors will still expect substantive integration. He said EBA analysis shows no major vulnerability from sovereign bond exposures, while geopolitical developments remain under close monitoring.

Recommended actions for compliance professionals: - Monitor the Commission's banking competitiveness follow-up and Irish Presidency files for concrete proposals on simplification, securitization, and reporting. - Inventory current reporting and compliance requirements to identify candidates for streamlining, and prepare input for consultations. - Maintain DORA readiness, including ICT third-party registers, concentration risk assessments, and AI-related operational risk controls. - Keep climate risk embedded in risk management frameworks and avoid scaling back on the assumption that rules will loosen. - Work with business lines and credit risk teams to confirm that risk appetite and lending governance support prudent growth without weakening underwriting standards.

Risk implications are moderate and mostly strategic. The main risk is misreading the push for lending growth and simplification as a relaxation of supervisory expectations. Capital adequacy, stress-test resilience, and operational resilience remain firm priorities. Institutions that prepare early for rule changes and keep strong controls are best positioned as the framework evolves.

Source: European Banking Authority