Featured Product

    ECB Reviews Profitability and Business Models of Banks in Euro Area

    September 18, 2018

    ECB published findings of the thematic review of banks’ profitability and business models; the review was conducted from 2016 to the end of the first quarter of 2018. The review shows that, although the economic situation of banks in the euro area has generally improved, profitability and business models remain under pressure. ECB also published frequently asked questions (FAQs) on the thematic review.

    The analysis shows that euro area banks are still adjusting after the crisis. High impairments, legacy issues, and pressure on revenues from the economic environment, along with low interest rates and high competition continue to challenge the profitability of many significant banks in the euro area. However, the profitability situation differs widely across institutions. Banks that have outperformed others over the last years are geographically spread out, have different sizes, and have differing business models. The analysis also confirms that banks' strategic steering capabilities are an important factor influencing the profitability of institutions.

    The thematic review investigated the strategic steering capabilities of the significant banks directly supervised by the ECB. Strategic steering capabilities refer to the management’s ability to set a course towards the bank’s long-term objectives. The review identified differences in the quality of banks’ internal setup to steer profitability. In general, banks with better steering capabilities have generated higher relative returns over the last three years. ECB Banking Supervision expects banks to have strong strategic steering and risk management capabilities.

    Bank-specific recommendations were issued regarding the necessary improvements to strategic steering or risk management capabilities. The recommendations involve understanding income and expense drivers, cost management and allocation, and loan pricing and strategy-setting processes. ECB Banking Supervision will monitor implementation of the expected improvements in strategic steering capabilities as part of the ongoing supervision. The results of the thematic review feed into the 2018 Supervisory Review and Evaluation Process (SREP) and may trigger on-site inspections and deep dives where further analysis is required.

     

    Related Links

    Keywords: Europe, EU, Banking, Thematic Review, FAQ, SREP, SSM, Risk Management, Business Models, ECB

    Related Articles
    News

    PRA Finalizes Supervisory Approach for Non-Systemic Banks in UK

    PRA published the policy statement PS8/21, which contains the final supervisory statement SS3/21 on the PRA approach to supervision of the new and growing non-systemic banks in UK.

    April 15, 2021 WebPage Regulatory News
    News

    EBA Finalizes Standards on Methods of Prudential Consolidation

    EBA published a report that sets out the final draft regulatory technical standards specifying the conditions according to which consolidation shall be carried out in line with Article 18 of the Capital Requirements Regulation (CRR).

    April 15, 2021 WebPage Regulatory News
    News

    EBA Updates List of Other Systemically Important Institutions in EU

    EBA updated the list of other systemically important institutions (O-SIIs) in EU.

    April 15, 2021 WebPage Regulatory News
    News

    BCBS Report Concludes Basel Risk Categories Can Capture Climate Risks

    BCBS published two reports that discuss transmission channels of climate-related risks to the banking system and the measurement methodologies of climate-related financial risks.

    April 14, 2021 WebPage Regulatory News
    News

    UK Authorities Welcome FSB Review of their Remuneration Regime

    UK Authorities (FCA and PRA) welcomed the findings of FSB peer review on the implementation of financial sector remuneration reforms in the UK.

    April 14, 2021 WebPage Regulatory News
    News

    PRA and FCA Letter on Addressing Risks from Use of Deposit Aggregators

    PRA and FCA jointly issued a letter that highlights risks associated with the increasing volumes of deposits that are placed with banks and building societies via deposit aggregators and how to mitigate these risks.

    April 14, 2021 WebPage Regulatory News
    News

    MFSA to Amend Banking Act and Rules in Coming Months to Transpose CRD5

    MFSA announced that amendments to the Banking Act, Subsidiary Legislation, and Banking Rules will be issued in the coming months, to transpose the Capital Requirements Directive (CRD5) into the national regulatory framework.

    April 14, 2021 WebPage Regulatory News
    News

    EC Delegated Regulation on Specialized Lending Exposures Under CRR

    EC finalized the Delegated Regulation 2021/598 that supplements the Capital Requirements Regulation (CRR or 575/2013) and lays out the regulatory technical standards for assigning risk-weights to specialized lending exposures.

    April 14, 2021 WebPage Regulatory News
    News

    OSFI Proposes to Enhance Assurance Expectations for Basel Returns

    OSFI launched a consultation to explore ways to enhance the OSFI assurance over capital, leverage, and liquidity returns for banks and insurers, given the increasing complexity arising from the evolving regulatory reporting framework due to IFRS 17 (Insurance Contracts) standard and Basel III reforms.

    April 13, 2021 WebPage Regulatory News
    News

    ECB Issues Results of Benchmarking Analysis of Recovery Plans of Banks

    ECB published results of the benchmarking analysis of the recovery plan cycle for 2019.

    April 13, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 6858