ECB Supervisor Backs Merging Macroprudential Buffers Into Two to Improve Usability

Key Takeaways

• ECB Supervisory Board member Sharon Donnery endorsed the High-Level Task Force's recommendation to consolidate the EU's macroprudential buffers into a non-releasable buffer and a releasable buffer.
• She also called for stronger micro-macroprudential coordination through an enhanced Macroprudential Forum.
• The speech is a policy signal, not a rule change, but it shows the likely direction of EU capital framework reform and matters for capital planning at EU-exposed banks.

Deep Dive

ECB Supervisory Board member Sharon Donnery endorsed the High-Level Task Force's recommendation to consolidate the EU's macroprudential buffers into a non-releasable buffer and a releasable buffer. She also called for stronger micro-macroprudential coordination through an enhanced Macroprudential Forum. The speech is a policy signal, not a rule change, but it shows the likely direction of EU capital framework reform and matters for capital planning at EU-exposed banks.

The central proposal merges the existing macroprudential buffers into two. A non-releasable buffer would combine the capital conservation buffer with the higher of the global systemically important institution (G-SII) and other systemically important institution (O-SII) buffers. A releasable buffer would combine the countercyclical and systemic risk buffers. The releasable buffer would carry a positive rate early in the financial cycle, when systemic risks are neither subdued nor elevated, so that capital is available for release in stress. Pillar 2 guidance would remain separate, and the speech states that the objective is to improve usability and coherence, not to reduce resilience. The speech also notes that buffer usability is constrained by distribution restrictions, market stigma, and interactions with the leverage ratio and MREL.

On governance, the speech does not propose changing the current allocation of macroprudential responsibilities. It proposes common principles and methodologies for calibrating all elements, and a stronger Macroprudential Forum of Governing Council and Supervisory Board members. That forum would assess how capital layers interact across the banking union, and the Single Resolution Board would be involved to reflect resolution requirements. The speech maintains a clear line between macroprudential buffers (systemic risks) and Pillar 2 (bank-specific risks). It also stresses clear communication that drawing on buffers is the system working as intended.

Recommended actions:

(1) Monitor follow-up legislative and supervisory steps, including any European Commission proposals, and the timing of any consultation.

(2) Model the capital stack under a two-buffer structure, including how a positive-rate releasable buffer in the early cycle could change total requirements and management buffers.

(3) Assess the interactions among buffers, the leverage ratio, MREL, and Pillar 2 guidance, and review internal capital-usability and distribution-restriction policies.

(4) Prepare to engage through industry associations and Joint Supervisory Team dialogue.

(5) Review internal and external messaging on buffer use. Because the final design, calibration, and transition arrangements remain open, the impact on any given bank's requirements cannot yet be determined. Overall near-term risk is low, with medium-term capital planning uncertainty.

Source: European Central Bank