By Marta Vilar – MADRID (Econostream) – The European banking framework has become unnecessarily complex in some areas and concerns about the credibility of European supervision should no longer stand in the way of efforts to simplify regulation and supervision, according to Banque de France Deputy Governor Denis Beau.

In an interview with Econostream (transcript here), Beau, who is also the designated chair of the French Prudential Control and Resolution Authority (ACPR) said the European prudential framework was “more complex than those of the United States or the United Kingdom and includes significant departures from international standards.”

Parts of the framework could be simplified without weakening its effectiveness, he said.

Beau pointed in particular to national boundaries in supervision that prevent banking groups from fully operating across borders within the European Union.

“As a result, banking groups cannot fully manage capital and liquidity on a consolidated basis,” he said. “Resources remain largely trapped at national level, which limits supervisors’ ability to adopt a genuine group-wide perspective. Removing these constraints would be helpful.”

While acknowledging that trust concerns may have contributed to the development of the current framework, Beau argued that more than a decade of Banking Union and European supervision had demonstrated its effectiveness.

“In my view, concerns about the credibility of the European framework are no longer justified,” Beau added. “Trust should not stand in the way of further simplification, whether regulatory or supervisory.”

Beau also suggested that Europe had occasionally gone beyond what was required in banking regulation under international standards, citing the implementation of the Basel output floor as an example.

“In some respects, yes,” he said when asked whether Europe had become too much of a model pupil in banking regulation. “Europe has occasionally gone beyond what was strictly required when implementing international standards.”

He noted that national authorities could choose to apply the output floor at consolidated, sub-consolidated and solo levels rather than only at the highest level, potentially leading to higher capital requirements even when a bank’s risk profile had not changed.

“Other jurisdictions, such as the UK, have adopted more pragmatic approaches,” he said. “Europe should avoid becoming overly rigid in its implementation of rules where doing so creates barriers to integration without improving stability.”

Looking ahead, Beau said the push for simplification was now firmly embedded within European banking supervision and was unlikely to be reversed by future leadership changes in the European Central Bank.

“There is broad recognition that improving supervisory effectiveness and efficiency is essential,” he said. “As a result, the simplification agenda is now firmly embedded in the SSM’s priorities.”

The simplification effort, including initiatives such as the SSM’s Next Level Supervision program, was part of broader institutional priorities rather than being linked to any individual leader, Beau said.

“For that reason, I expect them to continue regardless of future leadership changes,” he said when asked about ECB President Christine Lagarde’s departure, expected in 2027.

Beau added that the next challenge would be ensuring that simplification efforts translated into tangible benefits for banks through lower compliance costs and more efficient supervisory processes.

“There are already encouraging signs of progress, and I am optimistic that further results will follow,” he said.