The European Central Bank is simplifying banking supervision while maintaining capital and resilience requirements. Data points required for EU-wide stress tests have been reduced by around 55%, roughly 40 supervisory-guidance publications have been discontinued, and some decisions that previously took months can now be completed within days, Frank Elderson, Vice-Chair of the ECB Supervisory Board, said on September 30.
The changes are part of the ECB’s effort to make supervision more risk-based, efficient and proportionate. The stated aim is to focus supervisory resources on the most material risks rather than apply the same intensity to every area of every bank.
Stress-test reporting reduced by about 55%
The ECB and the European Banking Authority have simplified templates used in EU-wide stress testing. According to Elderson, the number of data points banks need to report has been reduced by around 55%.
The ECB is also streamlining the quality-assurance process while maintaining the stress test’s focus on relevant risks. A separate short-term supervisory reporting exercise has already had its data requirements reduced by around 20%, with further simplification planned.
Around 40 supervisory publications withdrawn
The ECB reviewed more than 100 publications containing supervisory expectations and good practices. Around 40 have been discontinued, while others have been shortened, consolidated or subjected to more extensive review.
The objective is to reduce duplication and make supervisory expectations easier for banks to navigate without weakening the underlying prudential standards.
Some decisions now take days instead of months
The ECB has also accelerated selected supervisory procedures. For simple capital-related decisions, 80% were approved within one week on average in the first quarter of 2026, compared with processes that previously could take months.
A fast-track procedure for straightforward securitisations has reduced approval times from around three months to less than ten working days. In some cases, average processing time has fallen to about a week.
Digital tools and artificial intelligence are also increasingly used in fit-and-proper assessments to process applications more efficiently.
Risk-based supervision does not mean lower capital requirements
Elderson stressed that simplification is not the same as deregulation. The ECB’s approach is intended to distinguish more clearly between material and less material issues while preserving the resilience of the banking sector.
The experience of the banking turmoil in 2023 reinforced the ECB’s view that formal compliance with capital and liquidity requirements is not sufficient on its own. Governance, risk culture and business-model weaknesses can still create significant vulnerabilities.
Cybersecurity and AI are moving higher on the agenda
The supervisory framework is also adapting to technology-related threats. The ECB has highlighted AI-assisted cyberattacks as an increasing operational risk and is monitoring the longer-term implications of quantum computing for cryptography.
One concern is the so-called “harvest now, decrypt later” threat, in which encrypted data are collected today with the intention of decrypting them when sufficiently capable quantum computers become available.
Elderson also pointed to the growing importance of the non-bank financial sector, which has expanded substantially since the global financial crisis and now accounts for more than half of euro-area financial-sector assets. The ECB argues that greater interconnectedness makes transparency and effective risk monitoring increasingly important.
The ECB wants fewer low-value processes and faster action on material risks
The broader direction of the reform is to reduce reporting and procedures that provide limited supervisory value while giving supervisors more room to concentrate on significant risks. Banks are expected to take greater responsibility for their own risk judgements, while supervisors can act more decisively when remediation is inadequate.
The ECB says this approach is built on the existing Basel III framework and does not involve lowering prudential safeguards.
Source: European Central Bank, Frank Elderson, Supervisory risk appetite, efficiency and effectiveness, Bali, September 30, 2026.
