At the 2025 EBA Policy Research Workshop in Paris, Claudia Buch, Chair of the Supervisory Board of the ECB, underscored the importance of resilient banks for sustaining Europe’s economic growth. Reflecting on the evolution of capital regulation since the 2008 global financial crisis, Buch highlighted how reforms have strengthened the banking sector while maintaining support for lending and economic activity.
The global crisis revealed weaknesses in pre-crisis frameworks like Basel II, where banks had insufficient capital, excessive leverage, and inadequate liquidity. In response, Basel III introduced higher-quality capital requirements, leverage and liquidity standards, and buffers designed to absorb shocks. These reforms, implemented gradually in Europe through CRR III and CRD VI, aim to ensure that banks remain resilient while supporting households, SMEs, and the broader economy.
Key takeaways from Buch’s address include:
-
Basel reforms were necessary and effective: Post-crisis reforms addressed the vulnerabilities exposed in 2008, aligning incentives for banks to manage risks prudently.
-
Capital and leverage strengthened resilience: Banks’ CET1 ratios now average around 16% in the euro area, and leverage ratios act as a robust backstop against excessive balance sheet expansion.
-
No long-term negative impact on lending or growth: Evaluations show that banks have maintained their capacity to lend to households and businesses, with positive long-term macroeconomic effects.
-
Liquidity and systemic risk addressed: New liquidity standards (LCR and NSFR) reduce the risk of bank failures due to illiquidity, while measures for systemically important banks enhance resolution credibility and protect public finances.
-
Evidence-based regulation is key: Buch stressed the importance of ongoing evaluation, better data infrastructure, and closer collaboration between supervisors, central banks, and academics to ensure policies remain effective.
Buch concluded that the post-crisis regulatory framework has delivered a stronger, more resilient banking sector that can support growth even under adverse conditions. The focus going forward is not to reopen the core prudential architecture but to evaluate its impact, extend its scope to emerging risks, and maintain evidence-based policymaking.
