The European Banking Authority (EBA) published the European Supervisory Examination Program (ESEP) for prudential supervisors and the European Resolution Examination Program (EREP) for resolution authorities. EBA will follow up on how the key topics put forward by the ESEP are embedded in competent authorities’ priorities for 2022 as well as reflected in their respective activities throughout the year. It will also follow up on how the key topics put forward by the EREP, are embedded in resolution authorities' priorities for 2022 as well as reflected in their respective activities throughout the year. While the two examination programs are independent, they are part of a coordinated initiative to enhance convergence in Europe.
The ESEP is relevant for supervisory colleges as converging practices and methodologies are indispensable in the context of cross-border banking groups. The interaction of the 2022 ESEP with the European Union Strategic Supervisory Priorities (the forward-looking considerations), which EBA is mandated to set, is also ensured. Under the ESEP, five key topics have been identified for supervisory attention in 2022:
- Impact of the COVID-19 pandemic on asset quality and adequate provisioning
- Information and communication technology (ICT) security risk and ICT outsourcing risk and risk data aggregation
- Digital transformation and fintech players
- Environmental, social, and governance (ESG) risk
- Anti-money laundering and countering the financing of terrorism (AML/CFT)
EBA published a similar initiative in the form of EREP, which identifies key topics for resolution authorities’ attention across the European Union. These topics are identified based on the EBA expertise in policy development in European Union, its role in colleges, and on the practical experience of resolution authorities. The identified topics are also for consideration in resolution colleges. Engagement between home and host college members on these issues will enhance convergence of activity in the context of cross-border banking groups. Resolution authorities are expected to consider the following key topics when developing their 2022 priorities:
- How Minimum Requirement for own funds and Eligible Liabilities (MREL) shortfalls are being addressed
- The development of management information systems for valuation in resolution
- Preparations for managing liquidity needs in resolution
Keywords: Europe, EU, Banking, Banking Supervision, Resolution Framework, ESG, Outsourcing Risk, AML/CFT, MREL, Regulatory Capital, Basel, ESEP, EREP, Resolution Authorities, EBA
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