- The Governor of the Bank of Finland Olli Rehn calls for the simplification of prudential regulation and supervision but emphasises that strong capital buffers are important for financial stability.
- Finance Finland’s CEO Arno Ahosniemi strongly supports the simplification of regulation and supervision. Ahosniemi also supports Rehn’s view that the legal basis and legal predictability of supervision should be clarified.
- Ahosniemi highlights that there is a need to review the overall level of capital requirements, as they affect banks’ lending capacity and the range of activities that banks finance.
The Governor of the Bank of Finland, Olli Rehn, calls for the simplification of banking regulation.
Rehn spoke at Finance Finland’s Financial Evening (Finanssi-ilta) in February. In his speech, Rehn discussed how Finland could generate employment and growth in today’s challenging conditions and emphasised the importance of banks’ ability to finance companies and households. He also reminded the audience that bank financing is, for the most part, functioning well in Europe.
“It is beyond question that banking regulation is in need of simplification. Much of the existing framework that was built over the years was prepared with great haste, because in the midst of crises there was often little choice. I freely admit: I was involved in that work. The end result is functionally stable but unnecessarily complex”, Rehn said.
In 2025, Rehn was a member in the high-level task force on simplification appointed by the Governing Council of the European Central Bank (ECB). The group was tasked with developing proposals to the European Commission for simplifying the European banking sector’s regulatory, supervisory and reporting framework. The key pillars of the group’s policy recommendations include clarifying and harmonising capital requirements, clarifying the legal basis of supervision and reducing overlapping reporting requirements.
Although Rehn advocates for the simplification of regulation, he also reminded the audience of the importance of capital buffers.
“The overall level of capital buffers should not be reduced. Strong solvency has been a cornerstone of the euro area banking sector’s resilience in recent years. The objective is clear: a more competitive, more integrated and more efficient European banking sector that does not compromise stability”, Rehn said.
Finance Finland’s Ahosniemi: The level of capital requirements must also be reviewed
Finance Finland’s CEO Arno Ahosniemi is pleased with Rehn’s comments on the clarification of the legal basis of supervision.
“Rehn is correct in stating that supervisory expectations alone should not create binding requirements that supersede EU legislation. He also correctly points out that legal clarity and predictability are key criteria of well-functioning banking supervision”, Ahosniemi notes.
However, Ahosniemi does not share Rehn’s views on the level of capital buffers.
“In its report, the ECB task force rightly noted that there are already too many different buffers and that it must be possible to release them in difficult times”, Ahosniemi says.
According to Ahosniemi, overlapping buffer requirements in particular must be removed; risks that are already covered by one requirement should not be covered again by another one.
“It is also essential for the requirements to be based on clear principles so that banks can anticipate the decisions of authorities”, Ahosniemi says.
Ahosniemi points out that the level of capital requirements has a direct impact on banks’ ability to grant loans and to finance economic growth.
“This is why technical amendments to capital requirements are not enough – the overall level of capital requirements must be reviewed, as it affects banks’ lending capacity as well as their financing decisions. In the present situation, the European economy needs more momentum in addition to stability”, Ahosniemi says.
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