Featured Product

    Mario Draghi of ECB on Progress with European Banking Supervision

    November 07, 2017

    The ECB President Mario Draghi spoke at the second ECB Forum on Banking Supervision. During his speech, he discussed the accomplishments of European banking supervision in three years. He noted, “European supervision has been instrumental in building a stronger and more resilient banking sector. A well-integrated financial sector with sound banks has helped transmit our policy impulses more evenly across the euro area. And it has allowed us to pursue an accommodative policy for as long as necessary, without building up significant financial stability risks.”

    The ECB President highlighted that the European banking supervision has brought about a more uniform approach on bank supervision, leading to a more resilient banking sector. The key catalyst for this change—along with the new EU regulations—has been the harmonization of the Supervisory Review and Evaluation Process (SREP). This harmonization has allowed supervisors to converge toward common benchmarks on risk assessment and has helped them consistently link their risk assessments to supervisory capital add-ons and other measures. The total capital ratio of banks supervised by the ECB has increased by more than 170 basis points since early 2015. The quality of capital has gone up as well: the high-loss absorbing component—that is, common equity tier 1 capital—now makes up the largest share of total capital of euro area banks. He also stated that specific weaknesses are also now being addressed, with non-performing loans (NPLs) being the most important issue. Many banks still lack the ability to absorb large losses, as their ratio of bad loans to capital and provisions remains high. Therefore, a joint effort is needed by banks, supervisors, regulators, and national authorities to address this issue, while creating an environment in which NPLs can be effectively managed and efficiently disposed.

    He also discussed about the benefits of strong supervision for monetary policy, "All the supervisory efforts have not only produced a more robust banking sector; they have also provided crucial support for our monetary policy since we entered a new easing phase in mid-2014." Stronger supervision is one of the sources for this support. Stronger supervision has helped to contain financial stability risks that may emerge during a long period of low interest rates. Credit risk exposures in bank loan books have declined as monetary policy has eased. Default rates have fallen and forward-looking measures also suggest a decline in credit risk. As part of its SREP, ECB Banking Supervision performs detailed, comparative assessments of bank business models, which feed into the ongoing supervisory dialog between the supervisory teams and banks. Mr. Draghi concluded, "We are now three years into the life of European banking supervision and the track record so far is encouraging. Though the single supervisor is still a young and developing institution, it has in many ways lived up to the high expectations that accompanied its founding. Rigorous and uniform supervision has led to higher levels of capital and a more resilient sector overall."

     

    Related Link: Speech

    Keywords: Europe, EU, Banking, Banking Supervision, SREP, NPL, Financial Stability, ECB

    Related Articles
    News

    EBA Single Rulebook Q&A: Second Update for November 2019

    EBA updated the Single Rulebook question and answer (Q&A) tool with answers to eight questions that relate to the Bank Resolution and Recovery Directive (BRRD) and the Capital Requirements Regulation and Directive (CRR and CRD).

    November 15, 2019 WebPage Regulatory News
    News

    FASB Delays Effective Dates for CECL, Leases, and Hedging Standards

    FASB issued two Accounting Standards Updates finalizing the delays in effective dates for standards on current expected credit losses (CECL), leases, hedging, and long-duration insurance contracts.

    November 15, 2019 WebPage Regulatory News
    News

    ESMA Updates Q&A on Securitization Regulation in November 2019

    ESMA updated questions and answers (Q&A) on the Securitization Regulation (Regulation 2017/2402).

    November 15, 2019 WebPage Regulatory News
    News

    HKMA Announces Finalization of Banking Liquidity Amendment Rules 2019

    HKMA issued a letter informing all authorized institutions that negative vetting of the Banking (Liquidity) (Amendment) Rules 2019 (BLAR) has now expired. Thus, the BLAR will now come into operation from January 01, 2020.

    November 15, 2019 WebPage Regulatory News
    News

    BCBS Consults on Revised Disclosures for Market Risk Framework

    BCBS launched a consultation on the revised disclosure requirements for the market risk framework for banks.

    November 14, 2019 WebPage Regulatory News
    News

    BCBS Consults on Disclosure Templates of Sovereign Exposures of Banks

    BCBS published a consultation on the voluntary disclosure templates related to sovereign exposures of banks.

    November 14, 2019 WebPage Regulatory News
    News

    PRA Publishes Final Policy on Maintenance of TMTP Under Solvency II

    PRA published the policy statement (PS25/19) that contains the final supervisory statement (SS6/16) on maintenance of the transitional measure on technical provisions (TMTPs) under Solvency II.

    November 14, 2019 WebPage Regulatory News
    News

    FSB Examines Implementation of Resolution Regimes in Financial Sector

    FSB published a report that examines progress in implementing policy measures to enhance the resolvability of systemically important financial institutions and sets out plans for further work.

    November 14, 2019 WebPage Regulatory News
    News

    IAIS Adopts ComFrame, ICS, and Holistic Framework for Systemic Risk

    IAIS adopted a comprehensive set of reforms—Common Framework (ComFrame), Insurance Capital Standard (ICS) Version 2.0, and Holistic Framework for Systemic Risk—that will enable effective cross-border supervision of insurance groups and contribute to global financial stability.

    November 14, 2019 WebPage Regulatory News
    News

    PRA Publishes Templates for Statistical Disclosures Under Solvency II

    PRA published templates for statistical disclosures, as required under Article 31(2) of the Solvency II Directive.

    November 14, 2019 WebPage Regulatory News
    RESULTS 1 - 10 OF 4157