ECB Seeks to Simplify Guidance

In a blog post published last week, Frank Elderson, a Member of the Executive Board of the European Central Bank (ECB), outlines the results of a comprehensive review of supervisory guidance documents, part of the ECB’s “Next level supervision” reform agenda.

The review covered roughly 130 publications. Around 40 have been identified as outdated or superseded and will be discontinued, though they will remain accessible for archival purposes. Others have received targeted updates to clarify certain aspects or to reflect recent regulatory developments. And some guides, Elderson explains, require more detailed revisions in light of forthcoming legislative developments and stakeholder feedback.

The most substantive revision concerns the Draft Guide on Governance and Risk Culture. After receiving over 1,000 stakeholder comments during a consultation in 2024, the ECB has decided to replace the Draft Guide with a report on good practices, planned for the first quarter of 2027. However, Elderson stresses that this does not alter the ECB’s view that governance or risk culture are essential to resilience. “[I]t is weak governance that allows underlying risks to build up unchecked until they have an impact on capital and liquidity,” Elderson writes. “Bad governance is therefore often the earliest and most reliable warning sign that an institution is heading for trouble.”

Elderson, who also serves as Vice Chair of the ECB’s Supervisory Board, emphasizes that simplification does not mean lowering standards or supervisory expectations. He clarifies that a bank's departure from a guide “should not, in itself, trigger supervisory reaction,” since guidance remains non-binding. Instead, the ECB aims to improve supervisory dialogue, making such engagement “more effective in an increasingly complex risk environment.”