The EBA Publishes Final Draft Amending Technical Standards Shortening the Timing for the Application for Prior Permission to Reduce Own Funds and Eligible Liabilities Instruments

Why It Matters

Shortening the approval window accelerates banks’ capital‑restructuring, lowering compliance costs and enhancing liquidity management across the EU banking sector.

Key Takeaways

• EBA shortens approval period to three months.
• Experience gained enables more efficient assessments.
• Daisy Chain Act exemption removes prior permission requirement.
• RTS simplification reduces regulatory burden for banks.
• Faster reductions improve capital flexibility.

Pulse Analysis

The European Banking Authority’s latest draft amendment to the RTS on own funds and eligible liabilities marks a notable shift in EU prudential regulation. By reverting the assessment window from four months back to three, the EBA signals that supervisory bodies have accumulated enough operational insight to streamline the review process without compromising risk oversight. This adjustment aligns with the original intent of the 2021 update, which extended timelines to accommodate learning curves, and now leverages that experience to restore efficiency.

For banks, the three‑month deadline translates into quicker capital‑restructuring and reduced administrative overhead. Faster approvals mean institutions can more promptly adjust their capital ratios, release eligible liabilities, and respond to market conditions, thereby improving liquidity buffers. The removal of the simplified procedure for entities covered by the Daisy Chain Act further trims procedural steps, cutting legal costs and freeing resources for core banking activities. Overall, the amendment reduces the regulatory friction that can delay strategic financial decisions.

On a broader scale, the amendment underscores the EU’s commitment to a proportionate regulatory environment that balances safety with competitiveness. By easing the procedural load, the EBA encourages banks to optimise balance‑sheet structures, potentially fostering more resilient financing for the real economy. The move also sets a precedent for future technical standard revisions, suggesting that regulators will continue to calibrate requirements based on practical experience and industry feedback, reinforcing confidence among market participants.