Proposal to Increase Asset Thresholds for Small Bank Deregulation
The European Central Bank (ECB) announced on October 20, 2026, that Frank Elderson, member of the ECB Executive Board and Vice-Chair of the Supervisory Board, detailed the Eurozone’s banking supervision stance and financial stability measures in an interview with the Austrian newspaper ‘Die Presse’. The interview, conducted on October 14, was released in full on the official ECB website on the 20th.
Executive Board Member Elderson emphasized the principle of ‘proportionality’ in supervision, offering specific measures to reduce the regulatory burden on small, non-complex banks. He proposed raising the total asset threshold for small banks eligible for regulatory relief from the current 5 billion euros to 10 billion euros. If implemented, this change would allow approximately 150 banks to benefit from a simplified reporting and regulatory framework. He further noted that the ECB is considering extending the cycle for periodic regulatory reviews and expanding the use of existing data in stress tests, depending on individual risk levels.
Warnings on Artificial Intelligence (AI) and Non-Bank Financial Risks
Executive Board Member Elderson stressed the need for proactive responses to financial sector risks associated with the adoption of artificial intelligence. While noting that AI can enhance the efficiency of risk management and fraud detection, he pointed out side effects including increased exposure to cyberattacks, reliance on a limited number of cloud service providers, and algorithmic bias. Consequently, the ECB requested that Eurozone banks review their IT budgets and human resources last July, and he confirmed that each bank must submit a detailed action plan regarding AI-related cyber risks by the end of October 2026.
He also warned about the potential for risk contagion due to the expansion of private equity and non-bank lending markets. He explained that while the growth of non-bank lending does not necessarily eliminate the underlying risk, the organic linkages between banks and non-bank financial institutions could allow credit risks to flow back into the banking system.
Emphasis on Completing the Eurozone Single Market and Basel III Compliance
Elderson identified the fragmentation of cross-border financial markets as the primary factor undermining the competitiveness of the European banking sector. To address this, he stated that market integration—rather than deregulation—is essential, emphasizing that the completion of the Banking Union, including the introduction of a European Deposit Insurance Scheme (EDIS), and the Capital Markets Union is urgent.
Regarding calls from some quarters to relax Basel III standards, he reiterated that adhering to common minimum standards is vital for the stability of the global financial system. He added that lowering standard regulations excessively does not eliminate risk but merely shifts the burden onto supervisory authorities.
Official Sources
- Full text of the ECB interview: Frank Elderson: Interview with Die Presse (Published October 20, 2026)