Europe needs simpler bank rules not lower capital: ECB's VP

ECB Vice President: Simpler Bank Rules Will Strengthen European Banks

ECB Vice President Advocates for Simplified Banking Regulations

FRANKFURT, Oct 2 (Reuters) - Europe's banks need simpler rules not laxer capital requirements, European Central Bank Vice President Boris Vujcic said on Friday, arguing that robust bank requirements are a source of strength.

The US has been easing some capital rules and European bank lobbies are also calling for a review of the regulatory framework, claiming it was too cautious and constrains the provision of credit. 

Current Capital Requirements and Competitive Advantage

"The present level of bank capital requirements is not a competitive disadvantage for European banks," Vujcic told a conference. "The fact that our banks are profitable and of sound standing today is a strategic advantage for Europe, because a resilient financial system is a prerequisite for sustainable economic growth." 

Complexity of Existing Rules

But Vujcic agreed that rules have become overly complex and regulators could simplify them without jeopardising safety.

Potential for Simplification

"I agree that such resilience does not necessarily require complex rules," he said. "The same level of resilience can, in many cases, be achieved with simpler ones."

Proposals for Regulatory Reform

Simplifying Capital Calculation

He said capital calculation should be simplified and various requirements, known as the capital stack, should be merged into two: a releasable and a non-releasable buffer.

Regulatory Relief for Smaller Banks

He also made the case for regulators to create a materially simpler regime for smaller, less complex banks, to ease their costs. Regulators should also simplify the resolution framework, Vujcic said.

(Reporting by Balazs Koranyi, Editing by Louise Heavens)