ECB's Elderson backs easier rules for small banks, fewer requirements

ECB's Elderson Advocates Simplified Regulations for Smaller Banks

Simplifying Banking Regulations for Smaller Lenders

FRANKFURT (Reuters) -European Central Bank supervisor Frank Elderson on Friday backed simplifying rules for smaller lenders and whittling down capital requirements for the sector as a whole.

The ECB is drafting proposals for simplifying banking regulation in the European Union, responding to banks' complaints that they are at a disadvantage to their U.S. peers, also due to President Donald Trump's deregulation drive.

Elderson proposed expanding a regime currently reserved for the region's tiniest and simplest institutions, which requires them to report just 30% of the data that larger banks must produce and to receive fewer inspections from supervisors.

Proposals for Regulatory Changes

"One could consider a more systematic application of this regime, as well as an increased scope," the Dutch legal expert told an ECB conference, adding this could be done within existing law.

Impact on Regional Banks

Germany, where regional and smaller lenders still make up nearly half of total assets, has been lobbying to create an entirely separate regime for smaller banks, which would require hard-to-pass changes to EU legislation.

Future Recommendations from ECB Task Force

Elderson also said the ECB could make its requirements more predictable and that there was scope for reducing the number of layers from the current nine, including those banks must have to absorb losses if they fail.

France has proposed subjecting Europe's biggest banks to a single buffer, rather than the current two, for the case of a failure.

An ECB task-force will consider all proposals before making its recommendations to the European Commission by the end of the year. This is part of the Commission's broader simplification initiative.

(Reporting by Francesco Canepa; Editing by Sharon Singleton)