The European Central Bank (ECB) formally submitted a package of banking reform proposals to the European Commission on April 14, explicitly requesting that legislators grant it greater authority over the overall capital requirement levels for banks. This includes the power to assess capital buffers set by national regulators, aiming to eliminate regulatory overlaps and blind spots. This move marks a critical step by the ECB in advancing the integration of banking supervision within the eurozone. According to the ECB's statement, a total of 17 reform suggestions were submitted, designed to help EU banks compete more effectively against rivals from the United States and other regions. The proposals have received unanimous backing from all central banks within the eurozone, with the clause concerning "authority to assess overall capital needs" being the most contentious. ECB Vice President Luis de Guindos stated in the declaration: "The eurozone central banks share a unified stance—a key step toward strengthening Europe's competitiveness is to establish a genuinely unified banking market where capital and liquidity can flow freely across borders, and all deposits receive equal protection."

The redistribution of powers and regulatory simplification are intended to enhance international competitiveness. The ECB's proposals clearly state that its Governing Council should be assigned the responsibility to conduct comprehensive assessments of the overall capital requirement levels both within the banking union and across it. These assessments would be carried out jointly by central bank policymakers and senior supervisory officials, though the specific methods for implementing the assessment results were not mentioned. The current system for bank capital requirements in the eurozone exhibits a significant two-track characteristic: approximately 110 "significant institutions" directly supervised by the ECB have their capital requirements set by the central bank, while the remaining small and medium-sized banks are primarily determined by national regulatory authorities. The ECB believes this fragmented supervision leads to inefficient capital allocation for cross-border banking groups. According to reports, around €230 billion in highly liquid assets within the eurozone banking system are locked due to regulatory requirements at national subsidiary levels, with a similar scale of capital trapped by regulatory barriers.

Regulatory authorities have been laying the groundwork for this move. In December 2025, a high-level simplification task force at the ECB had already proposed including "authority for overall coordination of capital requirements" in the reform agenda. Claudia Buch, Chair of the ECB's Supervisory Board, recently emphasized during a European Parliament hearing that the eurozone banking sector's overall Common Equity Tier 1 capital ratio stands at approximately 16%, with asset quality remaining stable, but medium-to-long-term risks remain elevated.

Beyond restructuring capital decision-making power, the ECB reiterated its call to simplify the macroprudential policy toolkit. Under the current framework, banks must simultaneously meet five buffer requirements: the capital conservation buffer, the global systemically important institutions buffer, the other systemically important institutions buffer, the countercyclical capital buffer, and the systemic risk buffer. The ECB recommends merging these five into two, arguing that the complex buffer system increases regulatory uncertainty without significantly enhancing financial stability effectiveness. This proposal continues the streamlining approach core to Basel III principles but emphasizes that "simplification must reduce unnecessary complexity, not resilience." Other key recommendations include: clarifying the legal status of convertible bonds, expanding the application scope of simplified supervisory regimes for small banks, and promoting the replacement of "directives" requiring national transposition with directly applicable "regulations" to improve legal consistency. The central bank also mentioned reducing the number of elements in risk-weighted and leverage ratio frameworks.

Regarding current capital adequacy, the eurozone banking sector's weighted average core Tier 1 capital ratio reached 16.1%, significantly higher than the combined regulatory requirement and guidance level of 11.2%. There is no short-term capital tightening pressure, with reforms focusing more on medium-to-long-term institutional optimization. In medium-term trends, if the "authority to assess overall capital needs" is implemented, capital allocation efficiency for cross-border banks could improve, and the streamlined buffer system would reduce regulatory complexity and compliance costs. Large European banks with multinational operations are likely to be the primary beneficiaries—under a unified assessment framework, capital redundancies caused by national regulatory differences could be released. Qualifying small banks would benefit from a simplified prudential framework, less frequent supervisory review and evaluation processes, and streamlined reporting requirements, potentially needing to meet only one of the risk-weighted capital requirements or the leverage ratio requirement, not both. For the vast number of regional banks and savings banks in the eurozone, this reform direction offers the most direct benefits.

Constraints remain, and obstacles to implementation persist. The stagnation of the European Deposit Insurance Scheme constitutes the largest institutional shortcoming in the banking union. Unified coordination of capital requirements is difficult to advance in isolation without a deposit insurance mechanism. Member states' willingness to transfer sovereignty is limited; core members like Germany have not softened their resistance to risk-sharing, creating a clear gap between the ECB's ambitions and practical political feasibility. The ECB's proposals call for "simultaneously advancing all key components of the banking union" and demand a clear timetable for the European Deposit Insurance Scheme. The interests involved in regulatory integration are profound: granting the ECB assessment authority over capital set by national regulators essentially transfers part of prudential supervisory sovereignty from member states to a supranational institution. Legal commentators noted that if all 17 suggestions are adopted, the eurozone's banking supervisory architecture would undergo its most profound transformation since the launch of the Single Supervisory Mechanism in 2014. However, against a backdrop of limited member state willingness to transfer sovereignty and heightened geo-economic uncertainty, there is significant tension between the ECB's ambitions and actual political feasibility.