The naysayers of banking regulation in Europe have it wrong. Since the Great Financial Crisis, it has been a success story. European banks are arguably more resilient than ever. But the post-crisis reforms were the result of extended and complicated negotiations that had to balance many different interests and goals.

Thus, European banking regulation is also more complex than ever. Regulators and supervisors must ask: is it time to simplify? Lobbyists will say yes, but simplification must not be mistaken for deregulation. The aim is not to lower standards, but to make the rules more transparent and effective.

Banks now face a maze of requirements. Large EU banks must comply with at least eight parallel “stacks” of requirements, spanning frameworks for both capital and the resolution process to manage the orderly failure of a bank. Each stack contains multiple layers – minimum requirements, buffers and supervisory add-ons – each with its own logic and consequences for non-compliance. The result is a byzantine regulatory framework that is difficult for banks, supervisors and markets to navigate. Worse, unintended interactions between different requirements risk threatening the effectiveness of the framework, especially in times of stress.

Take capital buffers: supervisors require banks to have additional capital to absorb losses, allowing them to maintain lending to companies and households in difficult times. But banks must also meet other regulatory demands in parallel, such as the resolution requirements or the overall cap on leverage. This can prevent banks from using the buffers as intended. In times of loss, these parallel requirements may become binding, forcing banks to shed assets and deleverage – potentially amplifying systemic stress. In addition, the overlaps can create confusion about which resources are truly available in a crisis.

Does this mean we should deregulate? Absolutely not. But after more than a decade with the current system, it is time to examine where simplification is possible. This means making rules more transparent and effective, without lowering standards. Three reforms could reduce complexity while preserving resilience:

Only use the strongest form of capital for meeting going-concern capital requirements. Banks currently meet their requirements with various types of capital, but Common Equity Tier 1 (CET1) – comprising shares and retained earnings – is the strongest and most reliable form for absorbing losses. Other instruments, such as Additional Tier 1 and Tier 2, are less transparent and have proved less effective or even counter-productive in periods of stress. Recognising only CET1 would halve the number of parallel requirements and ensure robust loss-absorbing capacity.

Separate capital and resolution requirements. At present, the same euro of capital is used to meet both capital and resolution requirements. This double-counting causes problems: either capital buffers are tied up in resolution requirements and cannot act as safety cushions in a crisis, or there are insufficient resources left to cover losses and protect taxpayers during the resolution of a failing bank.

You cannot have your cake and eat it. A clear solution is to separate capital and resolution requirements, with the latter met by instruments other than CET1. This ensures CET1 is available to absorb losses while the bank is still operating, while at the same time dedicated resources are reserved for use if the bank fails and enters resolution. This approach allows both frameworks to function more effectively.

Merge and simplify capital buffers. The current system features a bewildering number of buffers, such as capital conservation, systemic risk and countercyclical buffers. These could be consolidated, ideally into a single “releasable” buffer that supervisors can lower in periods of stress and a single “non-releasable” buffer to cover bank-specific idiosyncratic and systemic risks.

These reforms would reduce the number of stacks and layers of requirements, making the regulatory framework more effective, transparent and easier to manage, without sacrificing resilience.

Banks would be able to plan and use their capital more efficiently, supervisors could focus on the risks that matter and markets would have a clearer view of each bank’s resilience. Ultimately, resilient European banks are in the best position to support a competitive and more productive European economy.