Less is More: Streamlining Banking Regulation in Europe

JOINT REPORT
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Less is More: Streamlining Banking Regulation in Europe

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Brussels, April 2025 - The European Union's declining competitiveness, particularly in the financial sector, has become a growing concern. At the same time, the perceived disconnect between EU citizens and EU regulation is increasingly raised in public debate. One of the major contributing factors is the complexity and volume of financial regulation at the European level, which has created a dense, bureaucratic and often unstable regulatory environment.

To address these challenges, the European Banking Federation (EBF), together with the European Association of Co-operative Banks (EACB), the European Savings and Retail Banking Group (ESBG) and an ad hoc group of European law professors, lawyers and banking law experts, co-authored the Less is More report. The two-year project was led by the European Society for Banking and Financial Law (AEDBF Europe), with the backing of the European Banking Industry Committee (EBIC) and the European Forum of Securities Associations (EFSA).

The Less is More report provides a detailed analysis of the shifts observed in the European regulatory process for financial services. It highlights the increasing delegation of normative power from the EU co-legislators to the European Commission and European Supervisory Authorities (ESAs), often through a growing number of Level 2 and Level 3 texts. While these developments initially aimed to ensure faster and more harmonised implementation of financial legislation, the proliferation of technical standards, guidelines, Q&As and other soft law instruments has led to an excessively complex, capital-intensive and unstable regulatory framework.

For example, the 2024 Banking Package, consisting of approximately 1,000 pages, conferred 139 mandates to the European Banking Authority (EBA) for drafting technical standards and guidelines. This marks a significant increase compared to the 2019 Banking Package, which spanned around 500 pages and included 62 mandates. This trend reflects a gradual shift of legislative power away from the European Parliament and the Council towards the European Commission and ESAs, undermining the institutional balance, the democratic principle, and legal certainty within the Union.

The report identifies four main areas for improvement:

Stabilising and Simplifying the Regulatory Framework

• Conduct a comprehensive assessment of existing regulations to eliminate unnecessary complexity
• Limit the frequent use of review clauses that contribute to legislative instability
• Strengthen impact assessments and better account for the competitiveness of the European financial sector in legislative drafting

Strengthening Consultation and Transparency at Levels 2 and 3

• Systematically assess the impact of technical standards and soft law instruments
• Improve stakeholder consultations through earlier engagement, longer consultation periods, and greater transparency regarding expert groups and their composition

Reviewing the Governance of the European Supervisory Authorities

• Diversify the governance structures of the ESAs to better reflect market diversity
• Limit the adoption of soft law instruments to cases where a clear mandate exists in Level 1 legislation
• Clarify the "comply or explain" process to ensure that financial institutions have flexibility while maintaining regulatory objectives

Strengthening Political and Judicial Control of Level 2 and 3 Acts

• Enhance the European Parliament and Council's ability to scrutinise and, if necessary, oppose Level 2 acts
• Improve mechanisms for reviewing soft law acts, including pre-litigation appeals and judicial review by the Court of Justice of the European Union (CJEU)

The Less is More report coincides with the conclusions of the Letta and Draghi reports, the priorities of the new European Commission, and reflections from Member States, Members of the European Parliament, central banks and supervisors. These developments converge on the need for a comprehensive review and simplification of the European regulatory framework, ensuring it remains fit for purpose in a rapidly changing environment.

At a crucial time for Europe's economy, the report calls for action to ensure that regulation supports competitiveness, innovation and trust, while safeguarding financial stability and consumer protection.

To present and discuss the findings of the Less is More report, a conference will be organised at the European Parliament in Brussels on 30 April 2025, from 14:00 to 17:00.

The event will provide an opportunity to hear a presentation of the report, reactions from key authorities, and participate in discussions on practical solutions to improve the European regulatory process in the financial services sector. The conference is hosted by MEPs Stéphanie Yon-Courtin and Jonás Fernández.

Participation is free of charge, but registration is required.

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For more information please contact:

Sébastien de Brouwer, Deputy CEO, s.debrouwer@ebf.eu

Gabriel Daia, Head of Communications and Public Affairs, g.daia@ebf.eu

About the EBF:
The European Banking Federation is the voice of the European banking sector, bringing together national banking associations from across Europe. The federation is committed to a thriving European economy that is underpinned by a stable, secure, and inclusive financial ecosystem, and to a flourishing society where financing is available to fund the dreams of citizens, businesses and innovators everywhere.