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Wirtschaftsprüfer, Partner, Financial Services
Senior Manager, Financial Services
Managerin, Financial Services
Manager, Financial Services
Senior Manager, Financial Services
The growing focus on regulatory simplification across the European Union reflects a broader objective: reducing unnecessary complexity while preserving the resilience, consistency and comparability of capital and risk measures.
Over the past decade, credit risk regulation has evolved significantly, with banks navigating successive waves of reforms spanning capital requirements, stress testing, disclosures and supervisory expectations. While these developments have strengthened the resilience of the banking sector, they have also created increasingly complex frameworks that can be challenging to interpret, implement and maintain.
A key priority of the simplification package is to improve consistency across institutions and jurisdictions. Differences in credit risk methodologies, data definitions, modelling approaches and reporting practices can put regulatory compliance at risk and may lead to difficulties for regulators and market participants to compare institutions’ risk profiles and performance. Credit risk framework simplification should therefore be viewed as a strategic transformation project.
Achieving this requires more than revisiting policies and methodologies. Data management and reporting capabilities are fundamental enablers of sustainable simplification. Today, a significant portion of institutions continues to rely on fragmented data environments, inconsistent definitions, multiple systems and extensive manual processes. These limitations increase operational risk, undermine reporting quality and drive avoidable compliance costs. As regulatory requirements become increasingly data-driven, banks have an opportunity to simplify and automate end-to-end credit risk processes through stronger data governance, more integrated data architectures and streamlined reporting platforms.
Our latest publication examines the EBA’s public consultation on simplifying the EU credit risk framework. At BDO Germany, we support financial institutions in translating regulatory and supervisory expectations into practical, sustainable improvements across the credit risk lifecycle from risk origination and portfolio monitoring to governance, provisioning and capital management.