The European Central Bank says that banking supervision reforms have reduced processing times for certain standardized and lower-risk securitizations from approximately three months to around seven days and have cut by approximately 55% the number of data points requested from banks for stress tests. Frank Elderson, a member of the ECB’s Executive Board and Vice-Chair of the Supervisory Board, presented these results as examples of more selective and faster supervision without lowering prudential standards.
In brief
The ECB says that processing times for certain standardized and lower-risk securitizations have fallen from approximately three months to around seven days.
The number of data points requested for stress tests was reduced by approximately 55% by simplifying the forms and bringing them closer to regular reporting.
More than 100 publications containing supervisory guidance were reviewed, and approximately 40 were eliminated or are being withdrawn because they were outdated, replaced, or no longer considered necessary.
The ECB applies an approach under which lower-priority areas no longer automatically receive the same intensity of supervision every year, so that resources can be focused on material risks.
Elderson rejects the idea that reducing capital requirements would automatically lead to more lending or greater competitiveness and supports maintaining prudential standards.
The reform is part of the broader program through which European banking supervision is seeking to reduce the time and resources consumed by standardized procedures. The ECB has reviewed supervisory processes from end to end to eliminate overlaps, reduce requests for information that are not considered necessary, and make greater use of automation for cases that meet predefined criteria.
One of the clearest examples is securitization. For standardized transactions considered less risky, processing that previously took approximately three months has reached an average of around seven days. The ECB has also introduced accelerated procedures for certain capital decisions, and in the first months of the year approximately 80% of applications eligible for a reduction in own funds were processed in less than a week.
The changes do not eliminate the prudential assessment of transactions. The ECB says that shorter timelines result from clearer eligibility criteria, standardized forms, automation, and a focus of more in-depth analyses on cases involving higher risks. Accelerated procedures may be used only for operations that meet the conditions established by the supervisor.
Important simplification is also taking place in stress tests. The ECB and the European Banking Authority have worked on shorter forms that are more closely aligned with the information banks already submit through regular prudential reporting. The number of data points requested for the relevant exercises was reduced by approximately 55%, and the ECB is also preparing a more selective approach to checking the quality of the information submitted.
The supervisor is simultaneously seeking to eliminate redundant reporting in other processes. One of the periodic reporting packages has already been reduced by approximately 20% in terms of data points, and the ECB is working with other European authorities to identify overlapping requests. For minor reporting errors, a materiality-threshold-based approach is also being prepared, with the aim of reducing the number of resubmissions that do not provide relevant information for risk assessment.
The program also includes the documents through which the ECB explains its expectations to banks. European banking supervision has reviewed more than 100 guidelines and other publications accumulated since the creation of the Single Supervisory Mechanism. Approximately 40 are being eliminated, while others are being simplified, updated, or subjected to more extensive reviews.
However, the more profound change concerns how the ECB decides where to focus its attention. Through its framework for risk tolerance in supervision, teams may decide that lower-priority issues at a particular bank should not be analyzed every year with the same intensity. The ECB describes this choice as deliberate prioritization, not as a withdrawal from risk supervision.
The logic is that time saved in standardized or lower-risk cases should be used for vulnerabilities considered more important. These may include capital and liquidity, governance, business models, operational resilience, geopolitical risks, and the effects of climate- and nature-related risks. Where an important issue is identified, the ECB says that simplification must be accompanied by faster interventions so that the bank corrects the deficiencies.
Elderson linked this approach to the European debate on the competitiveness of the banking sector. According to him, a simpler and less prescriptive framework does not automatically imply lower capital requirements. He argued that lowering prudential standards does not guarantee increased lending, because the released capital could also be used for other purposes, including distributions to shareholders.
The ECB thus separates two components of the debate on simplification. The first concerns procedures that the supervisor can change directly, from approval times and reporting to guidance and the organization of inspections. The second concerns legislation and prudential requirements established at the European level, where changes depend on the institutions that adopt the rules.
The Next Level Supervision program complements the annual process through which the ECB assesses banks’ risks, capital, and governance. Implementation of the reforms continues in 2026 and beyond, and the ECB intends to publish indicators that will make it possible to assess the practical effect of the changes on banks and supervisory activity.
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