April 30, 2019

EBA published a report that presents its findings on the monitoring of supervisory colleges for the main cross-border European banking groups. The report also sets out the colleges' action plan for 2019. Considering the progress observed in the functioning of colleges over the years, the report mainly focuses on the quality of the colleges' deliverables and highlights examples of good practice.

The report provides key observations regarding the 2018 cycle of supervisory colleges. These observations cover organizational aspects of the colleges' work and interactions, colleges' deliverables, and the key topics for supervisory attention in 2018.  Seven key topics for supervisory attention had been identified for 2018 and these are non-performing loan cleaning, business model and profitability, information technology risk and operational resilience, internal governance, Brexit, structural changes, and IFRS 9. Overall, EBA identified a significant improvement in the colleges' deliverables, although further efforts are needed, particularly to ensure that the group risk/liquidity risk assessment reports form a real joint assessment of the group-wide risks.

The action plan of supervisory colleges for 2019 includes the key tasks for supervisory colleges, as defined by the legal framework; the key topics for supervisory attention; and the EBA approach for college monitoring in 2019. The list of key topics identified in the 2019 convergence plan includes internal governance, IT risk and operational resilience, non-performing exposures, and the use of benchmarking exercises for internal models. The key tasks for supervisory colleges in 2019 include the following:

  • Updating the mapping of cross-border group entities with all of the relevant information envisaged in the template of Annex I of the implementing standards on the operational functioning of colleges
  • Considering expanding the list of authorities with observer status in the light of the outcome of the EBA work on the equivalence assessment of the professional secrecy provisions of non-EU supervisory authorities, following the process envisaged in the Level-1 and Level-2 provisions
  • Organizing physical meetings and maintaining ongoing interaction in other forms (for example, conference calls, e-mails, and written consultations)
  • Adopting an annual college SEP, noting joint and individual supervisory activities, the resources committed from college members, and the timing and duration of these activities
  • Organizing and establishing timelines for the joint decision cycles envisaged by the Capital Requirements Directive (CRD) IV and the Bank Recovery and Resolution Directive (BRRD)
  • Developing and finalizing the group risk assessment and group liquidity risk assessment
  • Reaching joint decisions on capital and liquidity
  • Reaching a joint decision on the assessment of group recovery plans, measures to address impediments to these plans, and the need for individual recovery plans covering entities of the group
  • Organizing and concluding other joint decisions as required by the regulatory framework of CRD IV and the BRRD (for example, approving the use of internal models or the determination of a liquidity sub-group)

 

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Keywords: Europe, EU, Banking, Supervisory Colleges, Report, SREP, Operational Risk, EBA

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