A simpler, more usable macroprudential framework for Europe

Contribution by Sharon Donnery, Member of the Supervisory Board of the ECB, for the Eurofi Magazine

Dublin, 16 September 2026

Recent shocks have put Europe’s capital framework to the test – and banks have proven resilient. They are better capitalised than 15 years ago, and the shocks they withstood have confirmed the value of their resilience. Any redesign of the buffer architecture should therefore build on this achievement rather than reopen settled gains.

The EU capital framework contains multiple layers of requirements and buffers, including various macroprudential buffers, each with its own legal basis, methodology and decision-maker. While macroprudential buffers are meant to be built up in good times and used in bad times, they may be only partly usable: banks may be reluctant to draw on buffers because of distribution restrictions, market concerns and potential stigma. The presence of parallel constraints may also further exacerbate the issue of buffer usability.

The pandemic was a case in point. Where authorities released buffers, banks were better able to continue supplying credit than they would otherwise have been. At the same time, the evidence suggests that banks tried to preserve distance from buffer thresholds, especially where capital space was limited. Separate from that behavioural effect, actual buffer usability can also be reduced by interactions with other requirements, including the leverage ratio and the minimum requirement for own funds and eligible liabilities (MREL), which may limit the capital space available in practice.

This is why the simplification recommendations developed by the ECB’s High-Level Task Force and endorsed by the Governing Council provide the right starting point: the various macroprudential buffers could be merged into two buffers. A non-releasable buffer would combine the capital conservation buffer with the higher of the buffers for global and other systemically important institutions. A releasable buffer would combine the countercyclical and systemic risk buffers, and it would already have a positive rate in the early phases of the financial cycle, when systemic risks are neither subdued nor elevated, so that capital is available for release in times of stress.

This also requires clear communication, so that using buffers is understood as the system working as intended, not as a sign of weakness. Pillar 2 guidance would remain separate. The objective is not to reduce resilience, but to improve usability and coherence.

A more usable framework also requires closer coordination with microprudential policy. Micro- and macroprudential instruments serve different purposes but interact in ways that affect both the level and the usability of capital. Preserving a clear delineation is essential: macroprudential buffers address systemic risks, while Pillar 2 captures bank-specific risks. At the same time, better coordination can avoid overlaps and keep the capital stack coherent.

Governance should therefore evolve through stronger coordination and convergence. To harmonise how macroprudential elements are set and avoid unwarranted overlaps or inconsistencies, clear common principles and methodologies should guide the calibration of all the elements.

This does not require a change in the current allocation of responsibilities in the area of macroprudential policy. But improved coordination does require a more holistic view of capital demand across the banking union. An enhanced Macroprudential Forum, bringing together the members of the Governing Council and the Supervisory Board, could play a stronger role in this respect by providing a system-wide assessment of how the different layers of capital requirements interact, helping to strengthen consistency and transparency. This would be fully in line with the broader simplification objective, building on existing governance rather than creating a new institutional layer. The Macroprudential Forum already exists, and leveraging it would avoid the multiplication of bureaucratic layers while keeping current competences unchanged. To reflect the full interaction between microprudential, macroprudential and resolution requirements, this discussion should also involve the Single Resolution Board, representing the second pillar of the banking union.

Over time, such an approach could support a broader shift in perspective. In an increasingly integrated banking market, financial stability is a public good and it will increasingly need a common policy – with European and national authorities acting as essential partners within a single framework.

A redesign along these lines would make macroprudential policy stronger. A simpler framework is easier to explain, calibrate and use in times of stress. Buffers should be built up in good times and credibly available for release in bad times. If simplification improves usability, consistency and transparency while preserving resilience, that is the right test of success.