EUROFI 2025 reflections: regulatory simplification as a competitiveness imperative in a fragmenting global environment

Eric Cloutier, Partner, Forvis Mazars Group, took part in the EUFORI panel in September 2025 on ‘Simplifying EU banking regulation and supervision; priorities and next steps’. The session was moderated by John Berrigan, Director-General at DG FISMA, with esteemed panellists including senior policymakers and supervisors such as José Manuel Campa (Chairperson, EBA), Nathalie Aufauvre (Secretary General, ACPR), Jonás Fernández (MEP, ECON Committee) and Nadine Wiedermann-Ondrej (Federal Ministry of Finance, Austria). These are some of his reflections on the discussion. This article is complementary to the one published in the EUROFI magazine.

The global financial services regulatory landscape is entering a phase of accelerated divergence and fragmentation. Indeed, the U.S. is moving away from gold plating regulations to placing competitiveness at the centre of its policymaking. The resulting delays in Basel implementation have raised questions about the durability of global standards. In parallel, the UK has launched its own regulatory and policy review, anchored in its competitiveness and growth agenda for the financial sector. These shifts aim to rebalance resilience with economic relevance.

In contrast with this, the European Union (EU) remains anchored to a rule-dense, multi-layered architecture. Recent global developments, combined with heightened geopolitical and economic uncertainty, have intensified pressure on the EU to accelerate its supervisory review and ensure the long-term competitiveness and self-reliance of its financial sector.

The challenge for the EU is twofold: to recalibrate its regulatory and supervisory approach without compromising stability or fragmenting the Single Market and to do so with the speed and coherence required to avoid falling behind. The credibility and attractivity of the EU’s financial system now depends on its ability to shift from reactive adjustment to timely, coherent and impactful delivery.

“Regulatory simplifcation is a strategic imperative for the EU financial market. In today’s environment, it is essential to free up bank’s capacity for digital transformation, innovation and global competitiveness.”

Gregory Marchat, Group Head of Financial Services Advisory, Forvis Mazars Group

Calibration conundrum: speed without compromising the EU model

As Draghi warned, Europe’s challenge is not just inertia, but also fragmentation and a lack of strategic focus.

The publication of the Draghi report in September 2024 initiated robust discussions at the EU level, including the Commission’s launch of the Competitiveness Compass in January 2025 to operationalise Draghi’s vision. More recently, we have observed a wave of regulatory adjustments, ranging from the ECB’s review of its supervisory approach and roadmap to targeted reforms in areas such as securitisation and ESG reporting. These measures signal a growing awareness of the need for simplification and a willingness to act.

However, implementation remains uneven and slow, falling short of the systemic recalibration. Proportionality is still applied inconsistently and the Level 2/3 ecosystem continues to expand without a clear mechanism for consolidation or sunset. The Banking Union remains locked in circular discussions and undermined by national discretions.

What is needed is a swift and systemic recalibration, anchored in cost-benefit analysis and with proportionality more deeply integrated as a supervisory principle and through a binding, time-bound programme that brings these initiatives into a coherent whole. This means finalising CMDI and EDIS, launching a structured review of supervisory mandates and institutionalising competitiveness impact assessments across the regulatory lifecycle. Without such a framework, Europe risks remaining structurally misaligned with jurisdictions where regulatory agility is becoming the norm.

The ECB’s new task force on the cumulative impact of regulation is therefore pivotal. Supervisors will be explicitly reviewing how multiple requirements interact across prudential, resolution and reporting domains. If this review is able to produce a clear map of overlaps, prioritise quick wins and channel outcomes into EBA and Commission processes, it could mark a turning point in moving from incremental adjustment to structural simplification. However, credibility will depend on delivery. What is required is evidence that simplification can be made operational, felt by institutions and aligned with Europe’s broader competitiveness agenda.

The need for simplifying supervisory reporting  

A further test of Europe’s ability to simplify lies in supervisory reporting.

EU banks, especially smaller institutions, continue to face a compliance burden that sometimes exceeds what is proportionate to their risk profile. The volume and granularity of COREP and FINREP templates, extensive EBA technical standards and supervisory expectations under ICAAP and ILAAP remain demanding. In recent years, ESG reporting requirements have added further pressure, including imposing additional granular disclosure obligations on institutions with limited capacity. Despite multiple initiatives, there are also still duplications and inconsistencies across authorities, not only across EU institutions but also due to entrenched national practices.

In addition to technical standards and guidelines, supervisory practices can add to the regulatory burden. For example, the ECB has made BCBS 239, a Basel Committee standard, binding through its Guide on risk data aggregation and reporting (RDARR), requiring banks to implement robust data processes and warning of enforcement measures for non-compliance (including possible periodic penalty payments). This approach increases divergence with the UK and US, where such practices are not always enforced as binding rules.

While the importance of this data is widely recognised, the sheer volume has become overwhelming for the industry. The argument is that resources absorbed by reconciling all this data and managing large volumes of supervisory reporting cannot be deployed into risk management or financing innovation. This, ultimately, put strain on banks’ ability to compete with global firms facing lesser requirements.

On the positive side, momentum is building. Multiple efforts are underway to recalibrate reporting demands, reduce fragmentation, harmonise data standards and enable supervisory reuse, such as the ECB’s Integrated Reporting Framework, the EBA’s Pillar 3 Data Hub and the ESG Omnibus. Combined with greater use of technology in the supervisory process, these initiatives could materially ease the burden on financial institutions. Yet practical change remains slow.

If the EU can deliver on simplification, it will not only reduce cost but also strengthen supervisory trust and market transparency. The next challenge will however be to accelerate execution without compromising the transparency and integrity that underpin confidence in the EU financial system.

Implementing proportionality effectively without weakening prudential standards

Proportionality remains one of the most cited but least operationalised principles in the EU’s regulatory framework. Despite repeated commitments, its application continues to fall short of what is needed to support a diverse banking landscape.

Recent and ongoing reforms, such as the recalibration of STS securitisation, the ESG Omnibus package and incentives for ELTIF and PEPP, signal a shift toward more risk-sensitive, growth-aligned regulation. But these remain targeted fixes. Proportionality must go further: it must be embedded structurally across the supervisory framework.

Some have argued for a dual rulebook. However, the dual rulebook is not without critics. Some warn it could fragment the Single Rulebook, complicate supervision and create incentives for regulatory arbitrage. In practice, implementing a dual rulebook within the SSM would be operationally complex, could blur supervisory accountability and lead to confusion on regime application (especially for cross-border groups).

Another option is introducing a calibrated tiered approach, backed by quantitative thresholds. This would preserve a single legal structure, applying obligations gradually based on institutions’ size, complexity and risk profile. This could be complex to implement and would require strong coordination mechanisms and tailored guidance to support supervisory convergence and ensure harmonisation across jurisdictions.

Beyond proportionality calibration, another proposal is to embed a competitiveness test in every new EU financial-sector rule, benchmarking its impact against peer markets before adoption. A complementary idea is to introduce a supervisory-efficiency test to map oversight models against levels of market integration, helping policymakers assess whether current arrangements remain fit for purpose.

While no definitive solution has emerged yet, such ongoing industry dialogues reflect a recognition of the need for reform.

“Europe needs a supervisory efficiency test: oversight must be proportionate to market integration. The challenge is not more or less supervision, but smarter, more consistent supervision.”

Fabrice Demarigny, Global Head of Financial Markets, Forvis Mazars in France

The missing link of the Banking Union

The idea of a single jurisdiction for euro area banking supervision remains politically stalled. Despite broad consensus on its benefits, progress on completing the Banking Union, particularly EDIS and insolvency harmonisation, has been blocked for years by unresolved concerns over risk-sharing and national sovereignty. CMDI has made progress, but EDIS remains politically toxic for several Member States and insolvency harmonisation is legally and culturally complex.

Yet the costs of fragmentation are increasingly visible. National ring-fencing of capital and liquidity, divergent supervisory practices and inconsistent resolution regimes continue to undermine the Single Rulebook. The IIF and EBF both highlight how these barriers trap resources, increase failure risk and weaken crisis response.

The CMDI reform introduces useful elements, including more flexible resolution tools and streamlined access to safety nets. But uncertainty over depositor preference, funding backstops and MREL calibration for non-systemic firms continues to tie up capital that could otherwise support lending.

While a fully centralised jurisdiction may remain politically out of reach, industry voices, including in the latest EUROFI discussions, have proposed more pragmatic steps. These include finalising CMDI, harmonising key aspects of insolvency and introducing a single EU banking licence for cross-border groups. This would allow banks to operate under a common framework, while domestically focused institutions could benefit from a lighter regime.

In parallel, strengthening home-host cooperation, reducing national gold-plating and embedding competitiveness into supervisory mandates could help approximate the benefits of a single jurisdiction, without requiring treaty change.

Growing calls for global governance reforms

Fragmentation is not unique to Europe.

Global standard-setting continues to suffer from structural weaknesses: insufficient cost-benefit calibration, delayed equivalence assessments and a lack of feedback mechanisms for recalibration. Global misalignment is also not without cost. The IIF and GFMA have called for a more structured international policy cycle, built on early impact analysis, dynamic deference frameworks and periodic recalibration triggers to address unintended asymmetries.

However, Europe must go beyond endorsing these principles. The EU should embed them into its own regulatory lifecycle, particularly for Level 2 and Level 3 measures, by mandating cost-benefit reviews, improving stakeholder engagement and introducing formal sunset clauses. As the EBF notes, the proliferation of technical standards and guidelines without clear legal mandates has blurred the line between binding and non-binding rules, creating uncertainty and compliance friction.

Against this backdrop, industry bodies such as the IIF, EBF and GFMA continue to call for further simplification, better proportionality and deeper integration. But these calls must now be matched by a more strategic response. One that moves beyond tactical adjustments toward a coherent, risk-sensitive framework that preserves stability while enabling Europe’s financial system to support strategic investment and innovation at scale.

Recent developments in the U.S., with a strong push for regulatory simplification and a move away from gold-plating, underscore the urgency of the international debate on competitiveness. While these changes may increase pressure on the EU, it is essential that Europe carefully weighs its response. The EU must remain attentive to the evolving global landscape to avoid falling behind, while being careful not to compromise the core principles that underpin the soundness and reliability of its financial sector.

“Competitiveness must be embedded into the regulatory agenda itself. Aligning simplification with Basel implementation and capital markets integration is essential to ensure Europe’s financial system remains coherent, scalable and globally relevant.”

Sylvie Matherat, Global Senior Adviser, Forvis Mazars Group

Looking ahead: from ambition to execution

The case for simplification, proportionality and strategic coherence is clear, yet the path forward is institutionally and politically complex. Many of the proposals, dual rulebooks, single licences, recalibration cycles, are conceptually sound but operationally demanding. The challenge is not just what to do, but how to do it, within the constraints of EU law, institutional mandates and political realities.

Execution will require more than vision, for it will instead demand prioritisation, sequencing and above all, political will. The EU must cut red tape, not the rules and deliver with urgency. Failure to act now risks Europe permanently falling to second-tier financial markets behind the United States and the fast-advancing Asian centres.

“In an increasingly fragmented regulatory landscape, where global rule-based frameworks and capital flows face mounting pressures, the EU must step up as the stabilizing force, the adult in the room. By championing regulatory and supervisory predictability, it can safeguard financial stability and enhance the appeal of the single market, both within Europe and globally.”

Clémence Valleteau, Global Head of Public Affairs, Forvis Mazars Group