Less is more. Solutions to cool regulatory inflation

The quality and simplicity of laws are a symptom of the maturity of substantive democracy. They are not sufficient conditions per se, but certainly necessary in order not to slow down, directly and indirectly, the ability of European companies to compete in the internal market and especially in global markets. This is the case for many sectors of the European economy, but particularly so for the financial sector.

Promoted by the three European Banking Associations (EBF, EACB, ESBG) and their coordinating body, the EBIC, "Less is more" is the recently published Report offering information and assessments on the simplification and adequacy of EU regulations. It will be presented today in Milan, at the Università Cattolica del Sacro Cuore, at the initiative of the Faculty of Banking, Finance and Insurance Sciences, the Cooperative Credit Research Centre and Federcasse. The Report brings together the efforts of over sixty experts from many EU countries and constitutes to date the most extensive and systematic study of both analyses and proposals to overcome the current situation of European regulatory complexity and uncertainty in certain areas.

Let us make it clear from the outset that in our opinion the Banking Union remains indispensable, but it needs a comprehensive assessment a little more than ten years after its launch (a sort of comprehensive assessment of the single rulebook), a real simplification of approach and intervention. The Banking Union is based on a very articulated regulatory corpus: first-level rules (directives and regulations of the Parliament and the Council, Art. 289 TFEU); second-level rules (delegated acts-RTS issued by the Commission on its own or on the proposal of the three European Supervisory Authorities, Art. 290-291 TFEU and Art. 10 and 15 of the Regulation on ESAs) and third-level rules (so-called soft law of the ESAs: recommendations, guidelines, questions&answers, public declarations, etc.), pursuant to Articles 16, 29, 31 of the ESAs Regulation).

Today, simplification has become a priority of the new European Commission (2024-2029) and the first acts of both policy planning and legislative drafting seem to be moving in this direction. "I think that in order to correct the limitations and shortcomings of the current situation, and especially the overabundance of texts and concerns about their restrictive effects, we need to change the point of view and the mentality with which these problems are approached," says Jacques de Larosière, former Managing Director of the International Monetary Fund and honorary governor of the Banque de France, who signs the introduction to the 'Less is more' report.

The diagnosis of 'Less is more' can be summarised in three points: a) the proliferation of mandates attributed by the European co-legislators, Parliament and Commission (first-level legislation) to the EU Commission and to the Regulatory Authorities in three fundamental sectors: banking (European Banking Authority-EBA), securities and financial markets (European Securities and Markets Authority-ESMA), and insurance and occupational pensions (European Insurance and Occupational Pensions Authority-EIOPA) (second-level legislation); b) the limits and shortcomings of the legislative process: often insufficient consultations; proposals of the ESAs accepted and approved by the EU Commission not infrequently without amendments; the limited right of intervention by the Parliament and the Council; c) the acts not formally binding, but in fact to be considered as such, published by the ESAs, but also by the European Supervisory Authorities (SSM-ECB) and Resolution Authorities (SRB). The growing number of such acts is pointed out by Less is more as a source of regulatory uncertainty.