Featured Product

    ECB Issues Risk Assessment Report and Supervisory Priorities for 2020

    October 07, 2019

    ECB published the risk assessment report and the supervisory priorities for 2020. The supervisory priorities build on an assessment of the key challenges facing supervised banks in the current economic, regulatory, and supervisory environment. The risk assessment report specifies that the three most prominent risk drivers expected to affect the euro area banking system over the next three years are economic, political, and debt sustainability challenges in the euro area; business model sustainability; and cyber crime and IT deficiencies.

    These risk drivers are followed by execution risk attached to bank strategies on non-performing loans or NPLs, easing of lending standards, repricing in financial markets, Brexit, global outlook and geopolitical uncertainties, reaction to regulation, and climate change-related risks. The risk assessment report highlights that despite a significant improvement in asset quality in recent years, high levels of nonperforming loans remain to be a concern for a large number of euro area banks. Uncertainty stemming from the potential new regulation has decreased, but banks still need to adapt to operate in the new regulatory environment. Additionally, full implementation of the Basel framework as part of the Capital Requirements Regulation/Directive (CRR III/CRD VI) package will lead to an increase in minimum capital requirements and, as a result, an aggregated capital shortfall across EU banks. 

    To ensure that banks address these key challenges effectively, ECB Banking Supervision has reviewed its supervisory priorities. The key supervisory priorities of the ECB Banking Supervision include the following:

    • Continued efforts to address the stock of non-performing loans, prevent the future build-up of new non-performing loans, and engage with impacted institutions to follow up on bank-specific supervisory expectations within a harmonized framework. 
    • Work on ensuring the adequacy of internal models used by banks in calculating their regulatory capital requirements.
    • Work toward improving banks’ internal capital and liquidity adequacy assessment processes (ICAAPs and ILAAPs) by promoting a common understanding of the ECB expectations for banks. Moreover, ICAAPs of banks will be the focus of dedicated on-site inspections. Work will also proceed on improving transparency around the risk drivers of the Pillar 2 capital requirements.
    • Continued assessment of the information technology and cyber risks facing banks by carrying out on-site inspections and monitoring these risks as part of the Supervisory Review and Evaluation Process or SREP. 
    • Conduct, in 2020, the next supervisory stress tests for significant banks. 
    • Focus on bank adherence to governance expectations in the context of each of the above activities aimed at strengthening future resilience. 
    • Monitor, along with the national supervisors, the implementation of banks’ Brexit plans and their adherence to supervisory expectations. This includes banks’ progress toward their target operating models in the euro area, within the agreed timelines.

     

    Related Links

    Keywords: Europe, EU, Banking, Securities, Cyber Risk, Brexit, Credit Risk, Basel III, CRR/CRD, Internal Model, Climate Change Risks, SREP, Pillar 2, Stress Testing, ECB

    Featured Experts
    Related Articles
    News

    HKMA Urges Early Action for Adherence to IBOR Fallbacks Protocol

    HKMA urged authorized institutions to take early action to adhere to the IBOR Fallbacks Protocol, which ISDA is expected to publish soon.

    October 16, 2020 WebPage Regulatory News
    News

    FSB Sets Out Roadmap for Transition to Alternative Reference Rates

    FSB published a global transition roadmap for London Inter-bank Offered Rate (LIBOR).

    October 16, 2020 WebPage Regulatory News
    News

    HM Treasury Publishes Response to Proposal on BRRD2 Transposition

    HM Treasury published a document that summarizes the responses received from a consultation on the approach of UK to transposition of the revised Bank Resolution and Recovery Directive (BRRD2).

    October 15, 2020 WebPage Regulatory News
    News

    HM Treasury Publishes Response to Proposal on CRD5 Transposition

    HM Treasury published the government response to the feedback received on the consultation for updating the prudential regime of UK before the end of the Brexit transition period.

    October 15, 2020 WebPage Regulatory News
    News

    PRA Updates Supervisory Statement on Counterparty Credit Risk

    PRA published the final policy statement PS22/20, which contains the updated supervisory statement SS12/13 on counterparty credit risk.

    October 14, 2020 WebPage Regulatory News
    News

    FSB Publishes Update on Work to Address Market Fragmentation

    FSB published an update on its work to address market fragmentation. FSB is working in this area in collaboration with the other standard-setting bodies.

    October 14, 2020 WebPage Regulatory News
    News

    EBA Proposes to Revise Guidelines on Incident Reporting Under PSD2

    EBA proposed revisions to the guidelines on major incident reporting under the second Payment Service Directive (PSD2).

    October 14, 2020 WebPage Regulatory News
    News

    EBA Finalizes Standards for Prudential Treatment of Software Assets

    EBA published the final draft regulatory technical standards specifying the methodology for prudential treatment of software assets by banks.

    October 14, 2020 WebPage Regulatory News
    News

    FSB Publishes Roadmap on Cross-Border Payments, Report on Stablecoins

    FSB published a report presenting the roadmap to enhance cross-border payments by providing a high-level plan that sets ambitious but achievable goals and milestones in the five focus areas.

    October 13, 2020 WebPage Regulatory News
    News

    EIOPA Urges Insurers to Prepare for End of Brexit Transition

    In a recent communication, EIOPA urged the insurance sector to complete its preparations for the end of the Brexit transition period on December 31, 2020.

    October 13, 2020 WebPage Regulatory News
    RESULTS 1 - 10 OF 5959