The environment in which European banks are operating is changing fast. Technology is evolving rapidly, transforming how financial services are delivered and information is processed. Banks need to adapt their business models to sustain their long-term profitability. The risk landscape has changed significantly; geopolitical uncertainty is high. This requires good risk management, supervision, and regulation. At the same time, the benefits of post-financial crisis reforms are increasingly being questioned, the current supervisory and regulatory framework is being criticised as excessively complex. A weakening of global rules that help keep the financial system safe and sound is a real risk.
Simplification without deregulation requires strong guardrails. Simplification means maintaining resilience with a more effective and efficient supervisory and regulatory framework; deregulation means weakening regulation and supervision at the expense of resilience. In practice though, it can be difficult to draw a clear line between simplification and deregulation. The current rules are not there because the framework has intentionally been made too complex. Rules and procedures are there for a reason.
Ensuring that simplification does not weaken resilience requires an evidence-based, European reform agenda that enhances efficiency and effectiveness.
