Simplifying EU Financial Law: The European Banking Institute’s Report

EU Financial Law is too complex. So complex that it hinders the development of the Single Market in Financial Services. Over the past year, ‘simplification’ has featured prominently in the Commission’s work programme, as well as in contributions from industry and academia. This shift reflects a growing recognition that, while EU financial regulation has significantly strengthened financial stability—especially in the wake of the recent global financial crisis and the subsequent sovereign debt crisis in the euro area—as well as market integrity, and the protection of users of financial services, it has also accumulated various layers of complexity that undermine legal certainty, supervisory convergence, competitiveness, and innovation. If the EU institutions consider taking a decisive step towards achieving the Savings and Investment Union, and the Single Market more generally, simplifying its rules would be a good place to start.

The European Banking Institute (EBI)’s ‘Report on the Simplification of EU Financial Law’, published in January, contributes to the broad discussion in academia, policy, and markets following the Letta and Draghi Reports and the Commission’s simplification initiatives. The Report is the result of a collective endeavour among members of the Academic Board of the EBI. It seeks, first, to clarify what ‘simplification’ should be and, second, how simplification efforts could be structured in a manner that remains institutionally and methodologically robust—particularly in light of the Savings and Investment Union agenda.

This post synthesises the Report’s findings and suggestions. The following discussion presents some of the key topics; readers are encouraged to consult the full Report.

Complexity as a structural feature of EU financial regulation

The Report begins by acknowledging that complexity is currently a structural feature of EU financial regulation, rather than an accidental by‑product. Complexity has developed cumulatively through successive waves of legislative and supervisory intervention, each responding to legitimate but different policy objectives, including financial stability, market integration, technological innovation, sustainability, data governance, and financial crime prevention, as well as to political responses to market shocks and failures. Each wave has added rules, institutional arrangements, and procedures, with variations in meaning and emphasis, often without sufficient consolidation or realignment of earlier regimes.

The result is far from coherent or harmonious and does not convey the sense of a clear plan. The current regulatory architecture features overlapping legal sources, fragmented taxonomies, inconsistent definitions of key terms, and a growing reliance on highly technical and prescriptive provisions, which reflect a lack of trust in (typically national) authorities’ ability to achieve a uniform application and enforcement that brings certainty to the market. Each legal text, on its own, can bring clear benefits, but, as the Report underlines, the regulatory framework as a whole has increased compliance costs, reduced predictability, and made the framework more difficult to navigate for both supervised entities and authorities, without necessarily improving regulatory effectiveness and efficiency in enforcement.

The successive waves of new and amending legislation, along with the fact that managing complexity has become an objective in and of itself, have resulted in a gradual de-prioritisation of the objective of deepening the single market, while implicitly accepting that diverging transposition and implementation is the norm, and there is little to do about it. Complexity has thus ceased to be a tolerable side‑effect of ambitious regulation, but has rather become a structural characteristic of the system.

Institutional design and regulatory technique as drivers of complexity

The first set of findings concerns the institutional and procedural design of EU financial supervision. The Banking Union represents the most advanced form of supervisory centralisation, with the Single Supervisory Mechanism and the Single Resolution Mechanism delivering tangible progress in terms of convergence for significant credit institutions. By contrast, capital markets supervision remains largely decentralised and insurance supervision fully decentralised, coordinated primarily through the European Supervisory Authorities and national competent authorities. At the same time, the number of supervisory actors has expanded significantly, with EU institutions and agencies, national authorities, and newly created bodies such as the Anti‑Money Laundering Authority operating alongside one another.

This asymmetry has concrete implications for how law operates in practice: cross‑border entities are exposed to different supervisory cultures; convergence tools are defined and employed differently across sectors. The same entities may be subject, at once, to prudential, conduct, resolution, and AML/CFT supervision by multiple authorities operating on distinct legal bases, methodologies, and even cultures. This multiplication of actors and mandates complicates coordination, blurs accountability, and increases compliance burdens.

A further driver is the gradual erosion of the Lamfalussy framework. Originally, its rationale was to separate political choices (Level‑1), technical specification (Level‑2), and supervisory convergence through soft law (Level‑3). However, this hierarchy has progressively eroded: Level‑1 acts now frequently incorporate highly technical and granular provisions; Level‑2 delegated and implementing acts have multiplied; and Level‑3 guidelines, recommendations, and Q&As have become a substantial part of the effective rulebook. 

Recent case law of EU Courts has reinforced the de facto normative relevance of such instruments, intensifying concerns regarding legal certainty, proportionality and access to judicial review, and contributing to the ‘hardening’ of soft law.

The conspicuous absentee is Level 4. Enforcement, directly by the Commission, or by the ESAs, against Member States or their authorities for disregarding, or failing to properly implement EU law, is not a visible feature of the architecture. Conflicts of values or priorities, rather than openly addressed, are often muffled amidst increasingly long and ambiguous instruments of hard and soft law, in the expectation that a consensus will emerge somewhere down the road. This approach is not working, or, at least, is not working well.

These features are further exacerbated by frequent amendments of core statutes, extensive cross-referencing across legislative acts, and a technocratic drafting style embedding complex methodologies directly into primary legislation, collectively transforming large parts of the acquis into a moving target, complicating compliance and supervision without necessarily improving outcomes.

Fragmentation, cross‑cutting pressures and non‑financial objectives

A second set of findings addresses how this architecture interacts with the substance of the rulebook and with newer cross‑cutting agendas. Despite the ambition of a single rulebook, EU financial regulation continues to rely extensively on national transposition, options and discretions, and private law regimes. Core concepts such as ‘financial instruments’, ‘credit institutions’, or various client categories are defined inconsistently across legislative acts and sectors, leading to a fragmented adoption and application by Member States of what should consist of a common set of standards and rules.

These challenges are particularly visible at the intersection of sectoral frameworks and cross‑cutting policy objectives, where digitalisation, data‑governance, and sustainability initiatives add further layers that interact imperfectly with existing regimes.

What simplification is, and what it is not

Against this background, the Report devotes particular attention to clarifying the concept of simplification. It explicitly rejects approaches that conflate simplification with broad-based deregulation, self-regulation, or a general lowering of regulatory ambition. It further rejects the view that simplification should be understood as privatisation of rule‑making or as the easing or removal of rules applicable to specific actors or sectors. Rather, the Report treats the preservation of core objectives—above all, financial stability, market integrity and the protection of users of financial services—as a binding constraint that any simplification agenda must respect.

On this understanding, simplification is conceived primarily as a methodological and architectural exercise aimed at rationalising legal sources, stabilising definitions and taxonomies, as well as improving coherence across sectors and regulatory levels. It is framed as an ongoing task rather than a one‑off ‘clean‑up’. As such, it should include codification and may encompass targeted deregulation by a calibrated relaxation of specific elements of rules, where justified by robust evidence and a sound risk-sensitive analysis, and provided that substantive safeguards are preserved.

Towards a methodology for simplification 

On this basis, the Report outlines a set of policy proposals along institutional, substantive, and procedural dimensions. 

Institutionally, it calls for greater clarity regarding the legal status, mandates, and accountability of EU agencies, and for a more coherent and balanced approach to supervisory centralisation beyond banking. Substantively, it advocates restoring the Lamfalussy hierarchy, clarifying the normative effects of soft law, reviewing definitions and taxonomies and reducing national options and discretions where full harmonisation is feasible. Procedurally, the Report proposes a three‑step methodology: (i) systematically mapping rules against policy objectives; (ii) using that map to identify overlaps and other regulatory inefficiencies; and (iii) subjecting the resulting architecture to coordinated, evidence-based review. Particular emphasis is placed on simplifying reporting through integrated systems and common data standards, and on a coherent system of taxonomies and definitions.

The Report, therefore, conceives simplification not as a list of amendments, but rather as an ongoing task of managing a deliberately complex legal system. In this sense, simplification is presented not as an alternative to regulation but as a prerequisite for the long‑term effectiveness and legitimacy of EU financial law.

The European Banking Institute’s full report can be accessed here.

Christos V Gortsos is a Professor of Public Economic Law at the Law School of the National and Kapodistrian University of Athens & Guest Professor at the University of Luxembourg.

Filippo Annunziata is a Professor of Financial Markets and Banking Legislation at Bocconi University.

David Ramos-Muñoz is an Associate Professor of Commercial Law at Universidad Carlos III, Madrid

Thomaz de Arruda is a Member and Co-Coordinator of the European Banking Institute's Young Researchers' Group.

Milena Mitrović is a Doctoral Researcher at the Faculty of Law, Economics and Finance (FDEF), Department of Law, University of Luxembourg.

Fabian Schinerl is a Research Assistant & PhD candidate at the University of Vienna.