ECB to Speed Up Reviews of Share Buyback Plans by European Banks | Company Business News-OxBig News Network

European banks’ wait time for regulatory approvals for their shareholder payout plans is about to get shorter, as the region’s top watchdog steps up efforts to boost efficiency.

The European Central Bank is making procedures “quicker and more risk-based, including through the use of digital tools,” Supervisory Board Chair Claudia Buch said on Wednesday in Berlin. “For banks, this will mean clearer expectations, more standardized templates and faster turnaround times.” 

European banks have long criticized the ECB for what they view as its cumbersome oversight, while the bloc’s politicians have recently called on regulators to ease up on lenders so they can support economic growth. That’s increased the pressure on the ECB to show how a review it kicked off in 2022 will make it more effective while not sacrificing the industry’s hard-won resilience.

The processes for capital-related decisions, which include approvals for share buybacks and calls of deeply subordinated debt “are often resource-intensive,” Buch said in a speech at a Goldman Sachs Group Inc. conference. Yet such decisions are important for preserving sound capital positions, she said.

Under pressure from regulators, European banks boosted capital levels after the 2008 financial crisis. In recent years, they’ve increasingly used excess capital to reward shareholders.

Buch said that the improved ability to absorb losses has benefits for investors. Banks that “sail very close to the wind” can see more share price swings and higher funding costs while well-capitalized banks are better placed to “sustain dividend payments over time,” she said.

Still, Europe’s framework for setting bank capital requirements is complex and “can be reformed to make it simpler and more transparent,” Buch said.

“We need to know whether rules serve their purpose, such as enhancing resilience, and whether there are negative side effects, such as reduced lending or increased costs of funding for the real economy,” Buch said.

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