ECB softens governance expectations on banks

ECB will would scrap around 40 supervisory publications that it deems outdated

The European Central Bank will retire a number of recommendations and guides for banks and soften its expectations about good governance, it said on Friday, partly in response to industry criticism.

The European Central Bank will retire a number of recommendations and guides for banks and soften its expectations about good governance, it said on Friday, partly in response to industry criticism.

European regulators around the world have withdrawn some of the most intrusive measures put in place after the global financial crisis, led by an aggressive deregulation agenda by US president Donald Trump's administration.

"Our objective is simple: to ensure that our supervisory guidance remains clear, consistent and fit for purpose in an increasingly complex risk environment," ECB board member Frank Elderson said in a blog post.

As part of this effort, the ECB said it would scrap around 40 supervisory publications that it deems outdated. These range from a de facto dividend ban enforced at the height of the pandemic to expectations on data collection and reporting.

In addition, it would downgrade a draft guide setting out its expectations for lenders' governance and risk culture, which covered the inner workings of a bank from the remuneration and time-commitment of its board members to the protection of whistleblowers.

Instead, the ECB will from now on publish a report on good practices, which will not be binding.

"This means that a bank may be fully compliant with the applicable legal framework without implementing any of the good practices described in the guides, provided that it has put in place other practices that are more appropriate," the ECB said.

Other ECB guides, including a sensitive one about  lending, are also under review, with a conclusion expected by the end of this year.

Irish banks have pushed the Central Bank for regulatory easing. Tbe Banking and Payments Federation Ireland submission to the European Commission’ consultation on the competitiveness of the EU banking sector called for targeted reforms of the sector, including easing capital requirements. However, Central Bank deputy governor Mary Elizabeth McMunn said there was "little evidence" yet to support calls to reduce bank capital requirements on the basis of boosting lending and competitiveness.

Reuters