"EU watchdogs warn that weakening rules risks another financial crash"

Europe’s drive to simplify and streamline financial regulation is making top supervisors nervous about the risk of key safeguards being watered down. 

Two of the EU’s most senior financial supervisors told the Financial Times they were determined to avoid crisis prevention measures being swept away in the push to revive the region’s sluggish economic growth.

“If it is about deregulating and lowering the bar on financial protections, we will not be ready to tackle volatility.’’ said Dominique Laboureix, head of the Single Resolution Board — which handles failing Eurozone banks. ‘‘That means crises, which means less growth.”

The pointed intervention, which is uncommon for the watchdogs, comes after the European Commission recently announced plans to drastically cut the scope of business sustainability disclosure rules it introduced two years ago. It is also reviewing capital rules for banks and insurers as part of plans to boost financial market activity and growth. [...]

Elderson told a banking conference in London last week: “The debate on competitiveness should not be used as a pretext for watering down regulation.”

Instead of lowering regulatory requirements he said the EU should focus on harmonising them across its 27 members. “Don’t cut rules, harmonise them,” he said.

The ECB executive told the FT he supported “simplification in a nuanced way” of sustainability disclosure rules, but he warned if this went too far it could deprive banks of the information they need from companies to assess their own exposure to climate change risks.

“Was all this perfect? Probably not,” he said. “Can we do better without paying too much of a price? Possibly.” But he added: “If it were to lead to banks not having the data they need to assess these risks, that would be a problem for banks and would make our work as a supervisor more difficult.” [...]