ECB Says Weaker Bank Capital Rules May Fuel Payouts, Not Lending

The European Central Bank stepped up warnings against weakening capital requirements at lenders in the region, with its top oversight official saying such a move may fuel investor payouts rather than support the economy.

“Lower capital requirements would put the resilience of the euro area banking sector at risk,” Claudia Buch, who leads the ECB’s Supervisory Board, told euro-area finance ministers on Monday. “Lowering capital requirements would not guarantee more lending. Rather, it would weaken banks’ ability to keep credit flowing in times of stress, precisely when support for the economy is needed most.”