March 26, 2018

Danièle Nouy, Chair of the ECB Supervisory Board, presented the ECB annual report on supervisory activities for 2017. She presented the annual report to the Economic and Monetary Affairs (ECON) Committee of the European Parliament. She outlined the supervisory priorities for 2018 and discussed the key activities of ECB in 2017, particularly the work on non-performing loans (NPLs), targeted review of internal models (TRIM), Brexit, thematic reviews, and less significant institutions (LSIs).

Danièle Nouy began by examining developments in the banking sector and highlighting the increase in average common equity tier 1 ratio of euro area banks, along with the overall decrease in NPL ratio for banks under ECB supervision. She also discussed the ECB approach to tackle NPLs and the work done in this area during the year. She welcomed the legislative proposal of EC on the introduction of statutory prudential backstops and mentioned that ECB and EC have closely collaborated on the legislative proposal and the Addendum on NPLs. Furthermore, she stated that the TRIM project is progressing according to plan. About 90 TRIM on-site investigations were launched in 2017. Meanwhile, the first results of the project have become available: cases of non-compliance with the regulatory framework in respect of issues such as model governance and model validation have already been addressed through supervisory decisions.

With respect to Brexit preparations, she added that ECB and national supervisors expect to receive authorization applications by the second quarter of 2018 and that ECB is closely monitoring the relocation plans of banks. Speaking about the ECB thematic review on IFRS 9, she added that this exercise improved the quality of IFRS 9 implementation and allowed advanced data collection of the quantitative impact on the prudential figures. Moreover, ECB performed an in-depth assessment of the overarching governance of credit institutions and of data aggregation capabilities and reporting practices for a sample of banks. The results were communicated to these banks via supervisory dialog, and requests for remedial actions were included in the final follow-up letters. Joint supervisory standards have been developed on the licensing of LSIs with fintech business models. A common SREP methodology for LSIs was adopted and ECB harmonized the way in which national competent authorities exercise options and national discretions for LSIs.

She also outlined the four supervisory priorities for 2018: focus supervision on business models and profitability drivers of banks; monitor credit risk, with the emphasis still being on NPLs and exposure concentrations; review internal models (TRIM) and continue to push for improvement of internal processes for capital and liquidity adequacy of banks; and focus on supervisory activities for this year’s supervisory stress tests and Brexit preparations. She concluded that a genuine banking union not only needs the three pillars, but it also has to be a real union, without regulatory fragmentation and ring-fencing of national markets. Regulatory harmonization has to be accompanied by the completion of the institutional architecture, with a credible common backstop to the Single Resolution Fund (SRF), which should cover both solvency and liquidity support, and a fully mutualized European Deposit Insurance Scheme (EDIS). Ms. Nuoy finally mentioned that "we need a more European approach" toward combating money laundering. The legislation should be harmonized, possibly with a European institution, which cannot be the Single Supervisory Mechanism, in charge of ensuring consistent and thorough application across member states.

 

Related Link: Speech

Keywords: Europe, EU, Banking, NPLs, TRIM, Banking Supervision, Brexit, AML, ECB

Related Articles
News

EC Amends Regulation Supplementing Solvency II Directive

EC published the Delegated Regulation (EU) 2019/981 that amends the Regulation (EU) 2015/35, which supplements Solvency II Directive (2009/138/EC) on the taking-up and pursuit of the business of insurance and reinsurance.

June 18, 2019 WebPage Regulatory News
News

IOSCO Report Examines Application of International Cyber Standards

IOSCO published a final report that examines the application of the three internationally recognized cyber standards and frameworks by IOSCO member jurisdictions.

June 18, 2019 WebPage Regulatory News
News

PRA Launches 2019 Stress Test Exercise for Life and General Insurers

PRA has launched the biennial insurance stress test and is asking the largest regulated life and general insurers to provide information about the impact of a range of stress tests on their business.

June 18, 2019 WebPage Regulatory News
News

PRA Finalizes Reporting Amendments to Pillar 2 Liquidity Framework

PRA published the final Policy Statement PS13/19 on regulatory reporting amendments and clarifications to the Pillar 2 liquidity framework for banks in UK.

June 17, 2019 WebPage Regulatory News
News

FSB Assesses Implementation of Compensation Standards and Principles

FSB published the sixth progress report on the implementation of its principles and standards for sound compensation practices in financial institutions.

June 17, 2019 WebPage Regulatory News
News

IMF Publishes Reports on 2019 Article IV Consultation with Ireland

IMF published its staff report and selected issues report under the 2019 Article IV consultation with Ireland.

June 17, 2019 WebPage Regulatory News
News

EBA Updates Data on Deposit Guarantee Schemes in EU

EBA published the 2018 data on two key concepts in the Deposit Guarantee Schemes Directive (DGSD)—namely, available financial means and covered deposits.

June 17, 2019 WebPage Regulatory News
News

SNB Updates Form for Reporting Solvency Risk of Counterparties

SNB published the survey (Form Release 5.01) and related documentation for reporting solvency risk of counterparties in the interbank sector (ARIS).

June 17, 2019 WebPage Regulatory News
News

ISDA Studies Variation in Global Implementation of Margin Requirements

ISDA published a paper that highlights the main areas of difference in the implementation of margin requirements for non-cleared derivatives across jurisdictions and makes recommendations on how to resolve these variations.

June 17, 2019 WebPage Regulatory News
News

US Agencies Finalize Rule to Streamline Reporting for Small Banks

US Agencies (FDIC, FED, and OCC) adopted a final rule to streamline the regulatory reporting requirements for small institutions.

June 17, 2019 WebPage Regulatory News
RESULTS 1 - 10 OF 3265