Making supervision more effective without compromising resilience

Contribution by Patrick Montagner, Member of the Supervisory Board of the ECB, for Eurofi Magazine

Frankfurt, 24 March 2026

Simplification is a growing focus within the European banking sector. At the ECB, we are moving beyond rhetoric and implementing concrete changes to make supervision more efficient and risk-based, while preserving the strength of the prudential framework.

Balancing efficiency with prudential standards

At the ECB, we understand simplification as reducing undue complexity in supervisory processes and requirements without weakening prudential standards or undermining resilience. This work is not new. We started this journey by harmonising the Supervisory Review and Evaluation Process, following recommendations from the High-Level Task Force on Simplification. We have now taken the next step by publishing a comprehensive reform agenda for European banking supervision.^[1]

A key principle of simplification is predictability. When supervisory expectations are clearer and engagement more transparent, banks can anticipate supervisory judgements better and allocate resources to managing material risks, rather than navigating procedural complexity.

From a supervisory perspective, complexity is justified when it delivers proportional benefits for financial stability and risk assessment. However, complexity can reach a point where additional granularity or procedural layers no longer enhance supervisory outcomes. This occurs when requirements become repetitive, reporting obligations duplicate existing information or processes slow down without improving the quality of decisions.

Competitiveness requires deeper integration and harmonisation

The renewed focus on simplification is closely linked to discussions on the competitiveness of the European banking sector and the wider European economy. While competitiveness matters, it is important not to misdiagnose the problem. The main constraint on European banks’ competitiveness is the lack of scale and integration resulting from an incomplete Single Market. Competitiveness in Europe will not be strengthened by lowering capital standards, but by achieving deeper integration and greater harmonisation.

Harmonisation is central to simplification itself. Applying one coherent framework across the European Union is inherently simpler than navigating 27 separate national regimes. However, simplification efforts must be aligned with national supervisory practices. If national authorities introduce additional requirements or divergent interpretations, complexity will simply shift rather than decrease. Close coordination is therefore crucial to ensure that simplification gains at the European level are not offset by fragmentation at the national level.

The ECB is delivering concrete reforms

In December, the ECB published a comprehensive reform agenda setting out how European banking supervision will become more efficient, effective and risk-based within the existing legal framework^[2]. The reform programme rests on two mutually reinforcing foundations: the use of technology and a shared supervisory culture.

Technology is a key enabler of simplification. Digital tools, automation and advanced analytics allow supervisors to process large volumes of information more efficiently, reduce manual and repetitive tasks and better integrate data across supervisory processes. At the same time, simplification must be anchored in supervisory culture. A forward-looking, integrated and risk-based supervisory mindset is essential to translate streamlined processes into better outcomes.

These changes will have tangible effects on banks’ day-to-day supervisory interactions. Digital and fast-track processes for fit-and-proper assessments have reduced processing times. In addition, a dedicated fast-track approval process for low-risk own funds transactions aims for decisions within two weeks once fully operational. Supervisory reporting has been streamlined by reducing duplication across data collection, improving alignment between regular reporting, stress testing and ad hoc requests, and applying a stronger focus on materiality.

Going forward, we will review our ECB guides to further streamline supervisory expectations, remove overlaps and improve accessibility.

Each level of governance has a role to play. Legislators can reduce complexity by consolidating requirements in primary legislation. Supervisors can streamline implementation through clearer guidance and more efficient processes. National authorities can support simplification by aligning their practices with European standards.