World leaders agreed a package of capital requirements after banks had to be shored up by taxpayers in the financial crisis a decade ago and the EU is now putting into law final elements of what is known as the Basel III accord.
It is also reviewing other EU banking rules to help banks continue lending to companies which have been hardest hit by the coronavirus pandemic.
In a paper to other EU states, finance ministry officials from France and Germany suggest "avenues" on how to "faithfully" implement the package while ensuring loans flow uninterruptedly, and that variety in size of banks in Europe is acknowledged.
Basel introduces a "floor" or level of capital below which a bank cannot go to cover risks from loans on its books.
France and Germany say in the paper that the floor should in the main only relate to risk-based capital requirements.
Under the new rules, banks would have to apply a flat risk weighting of 100% of capital on loans to companies which are not given a score by credit rating agencies, something that poses "serious risks" to financing the economy, the paper said.
Unlike other parts of the world, almost 75% of company exposures are unrated in Europe.
The EU should opt for a "hybrid approach" that would allow banks to cut the risk weighting to 65% for financially sound companies, the paper said.
Disclosure requirements for small and non-complex banks should be further reduced to cut costs, it added.
Under EU rules, banks pay a portion of a bonus upfront in cash, with the rest deferred over several years and paid in shares.
"Requirements on variable remuneration should not apply to small and non-complex banks where the share of variable remuneration is sufficiently low," it added.
The definition of a non-complex and small bank should exclude derivatives contracts concluded on behalf of customers to hedge risks and not for speculation, it said.
By Huw Jones