ECB Supervisor Urges Single Rulebook and Banking Union Integration as Path to Simplification

Key Takeaways

• ECB Supervisory Board member Sharon Donnery argues that integration, not deregulation, is Europe's most effective simplification strategy.
• She calls for converting directives into directly applicable regulations, treating the banking union as a single jurisdiction for capital and liquidity, and creating a unified reporting framework.
• The speech is not binding, but it signals the ECB's policy direction and where supervisory expectations and legislative proposals are likely to move.

Deep Dive

ECB Supervisory Board member Sharon Donnery argues that integration, not deregulation, is Europe's most effective simplification strategy. She calls for converting directives into directly applicable regulations, treating the banking union as a single jurisdiction for capital and liquidity, and creating a unified reporting framework. The speech is not binding, but it signals the ECB's policy direction and where supervisory expectations and legislative proposals are likely to move.

Three integration measures are proposed. First, make the single rulebook truly single by reviewing national options and discretions and shifting from directives to directly applicable regulations where divergence serves no prudential purpose. This would affect governance, licensing, and fit and proper assessments. Second, treat the banking union as a single jurisdiction by allowing cross-border capital and liquidity waivers within groups and lifting ring-fencing measures. This depends on completing the architecture, including a European deposit insurance scheme with a clear implementation timetable and a European framework for liquidity in resolution. Third, introduce an integrated reporting framework so banks report the same data once, shared across statistical, prudential, and resolution authorities. The speech also supports extending the small and non-complex institutions regime to embed proportionality. No timelines are given for any of these measures, and most require EU-level legislation.

The ECB also says it is simplifying its own supervision through simpler procedures, more delegated decisions, streamlined reporting, more targeted inspections, and clearer guidance. Banks are expected to contribute by simplifying legal and operational structures, rationalizing internal models, and improving data quality. Complexity created by national add-ons, parallel requirements, or internal inefficiency is explicitly called out as unwelcome, so firms should anticipate supervisory attention to these areas.

Recommended actions for compliance professionals:
- Map where national transpositions, options, and discretions create divergent obligations across the group, and quantify the cost of parallel processes.
- Assess readiness for potential group-level capital and liquidity management, including governance, intragroup arrangements, and recovery and resolution implications.
- Review regulatory reporting architecture and data lineage to identify duplicative submissions and prepare for a consolidated framework.
- Prioritize data quality and internal model rationalization, since these are named supervisory expectations.
- Track EU legislative developments on deposit insurance, liquidity in resolution, and the Commission's banking competitiveness work, and consider engaging through industry associations.

Risk implications: near-term impact is low, as the speech is directional and depends on legislative action that may be slow and politically contested, particularly on deposit insurance and ring-fencing. Over the medium term, successful integration could reduce compliance costs and trapped capital, but it may also raise expectations for group-level risk management, data integrity, and cross-border governance. Institutions with weak data or fragmented structures may be at a disadvantage.

Source: European Central Bank