The Deutsche Bundesbank wants to simplify banking regulation without compromising on minimum standards. At the Börsen-Zeitung Retail Banking Day last week, Michael Theurer, Executive Board member responsible for banking supervision, explained that several starting points had been identified in the course of a self-critical examination of rules and procedures.

For example, the Minimum Requirements for Risk Management (MaRisk) are being scrutinised together with BaFin in order to explore ways of streamlining them. The regulations have grown considerably in recent years. „The aim of the review is to simplify them and to make them even more proportional and risk-orientated,“ said Theurer. He sees great potential here, though the process is still in its infancy.

According to Theurer, there is further potential for reform in reporting and supervisory stress tests, and the Bundesbank is also working on simplifying various European Banking Authority (EBA) guidelines. Smaller institutions in particular could benefit from the measures.

Theurer has also looked at countries such as Switzerland, the UK and the USA, where more far-reaching simplifications have been introduced than in the EU. They are characterised by small balance sheet totals, which in addition are also less complex and do not have risky business models.

In the UK, for example, a threshold value of 20 billion pounds is to be set, below which simplifications are to apply or even already apply, such as in the reporting system. Simplifications for capital requirements such as a single capital buffer and the calculation of risk weights based on simplified Basel rules are being considered.

As a result, the requirements will be significantly simpler – though also less risk-sensitive and less individualised. The aim is to maintain the stability of the banking system without any compromises. It is therefore unlikely that capital requirements will be eased overall.

In Theurer's view, the Basel III regulations implemented to date have proved their worth. He spoke out in favour of full implementation of the banking package by the European Union. „We do not want to and will not deviate from full implementation – because it is a carefully balanced compromise,“ he explained. It was thanks to regulation that the European financial system had survived the consequences of the coronavirus pandemic, and the failures of Silicon Valley Bank, Credit Suisse, and others, without major damage.

Overall, he described the effects of regulation as positive. No significant negative influences on economic growth or lending were recognisable. The positive consequences of regulation include lower volatility. Banks with higher capital buffers are more resilient and have proven to be more reliable providers of credit to the real economy, especially in times of crisis, emphasised the banking supervisor.