European Union officials are signaling that a review of the banking sector’s competitiveness will not automatically translate into relaxed capital requirements, despite growing pressure from the industry and recent deregulation moves in the United States.
John Berrigan, Director-General for Financial Stability at the European Commission, cautioned against a “Pavlovian” response to competitive pressures, specifically referencing potential capital requirement reductions elsewhere. “Just because another jurisdiction lowers capital requirements, [we should not] automatically have…” he stated, according to a report from Risk.net published today.
The statement comes as a task force of top euro area officials prepares to deliver proposals on bank capital buffers and efficiency measures to the European Central Bank (ECB) before the end of the year, according to a Bloomberg report from November 18, 2025. EU bankers are reportedly bracing for a disappointing outcome from this overhaul, anticipating that hoped-for relief may not materialize.
The ECB itself is internally divided on the issue of capital requirements. Sensitive research completed last year, but not yet publicly released, reportedly shows that capital requirements for large EU lenders would increase by a double-digit percentage if they were aligned with current US prudential rules. Some senior policymakers at the ECB are advocating for the report’s publication to counter lobbying efforts from the banking sector to weaken the implementation of the Basle agreement, according to reports from the Financial Times and the Irish Times, both published November 18, 2024.
The Basle III package, an international regulatory framework designed to strengthen bank capital standards following the 2008 financial crisis, is at the heart of the debate. EU banks are pushing back against the package’s restrictions on the leverage of internal models for calculating capital needs. This push is further fueled by the prospect of deregulation in the US following Donald Trump’s election victory, with the potential for US authorities to dilute or abandon plans to implement the Basle rules.
Recent data from the ECB, released November 18, 2025, indicates that ECB-supervised banks maintain robust capital and liquidity positions, with overall CET1 capital requirements and guidance remaining broadly stable at 11.2% and 1.2% respectively. Non-binding Pillar 2 guidance for 2026 decreased slightly, from 1.3% to 1.1%.
The European Commission’s stance suggests a reluctance to engage in a race to the bottom on capital standards, even as the banking sector seeks to enhance its competitiveness. The ECB’s internal debate and the unresolved question of whether to publish the comparative research on EU and US capital requirements underscore the ongoing tension between regulatory prudence and industry demands.
