ECB Publishes Statements from Annual Banking Supervision Conference
ECB published introductory statements by Danièle Nouy and Sabine Lautenschläger of the ECB Supervisory Board at the annual press conference on ECB Banking Supervision in Frankfurt. ECB also published a transcript of the question and answer (Q&A) session with both the members of the ECB supervisory board. They discussed the challenges that banks still face in terms of nonperforming loans (NPLs), Basel III implementation, and Brexit.
During her statement, Danièle Nouy highlights that banks still face a number of challenges and that 2018 offers the ideal opportunity to tackle them. One of the key challenges is reduction of NPLs. To this end, last year, ECB published guidance for banks on how to reduce their NPLs. Cleaning up balance sheets after a crisis is one thing and keeping them clean ahead of future downturns is another. Thus, ECB is working on an addendum to its guidance that will specify how and when ECB expects banks to provision for new NPLs. The draft addendum was subject to a public consultation, which triggered almost 500 comments from 36 counterparties. She highlights that ECB has reviewed the comments and is expected to published the addendum in March. Among other things, ECB will shift the date from which the guidance applies to new NPLs and will make it even clearer that it will follow a case-by-case approach as part of its Pillar 2 framework. She also discussed the progress toward European deposit insurance scheme, or EDIS as the final pillar of the Banking Union and welcomed the EC proposal on this. She concluded that “conditions are as good as they are going to get” and “banks should seize the moment and tackle all the challenges they face.”
Sabine Lautenschläger emphasized the importance of ensuring that Basel III is fully and timely implemented in all countries. To this end, she also discussed the objectives and goals of the targeted review of internal models, or TRIM. She then discussed the challenges faced due to Brexit and highlighted that any bank that wishes to relocate from the UK to the euro area should submit its license application by the end of the second quarter of 2018. So far, eight banks have already taken formal steps to seek a new license while four other banks are planning to significantly extend their activities in the euro area. ECB will continue to closely monitor the Brexit negotiations. She concluded that banks must remain in control of their own risks. “Brexit is just one of the many challenges that banks are facing right now—challenges that they need to address while times are good.”
Related Link: Statements and Q&A Transcript
Keywords: Europe, EU, Banking, NPLs, TRIM, Brexit, Basel III, ECB
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Patrycja Oleksza
Applies proficiency and knowledge to regulatory capital and reporting analysis and coordinates business and product strategies in the banking technology area
Related Articles
SEC Finalizes Climate-Related Disclosures Rule
The U.S. Securities and Exchange Commission (SEC) has finalized the long-awaited rule that mandates climate-related disclosures for domestic and foreign publicly listed companies in the U.S.
US Regulators Release Stress Test Scenarios for Banks
The U.S. regulators recently released baseline and severely adverse scenarios, along with other details, for stress testing the banks in 2024. The relevant U.S. banking regulators are the Federal Reserve Bank (FED), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).
Asian Governments Aim for Interoperability in AI Governance Frameworks
The regulatory landscape for artificial intelligence (AI), including the generative kind, is evolving rapidly, with governments and regulators aiming to address the challenges and opportunities presented by this transformative technology.
EBA Proposes Operational Risk Standards Under Final Basel III Package
The European Union (EU) has been working on the final elements of Basel III standards, with endorsement of the Banking Package and the publication of the European Banking Authority (EBA) roadmap on Basel III implementation in December 2023.
EFRAG Proposes XBRL Taxonomy and Standard for Listed SMEs Under ESRS
The European Financial Reporting Advisory Group (EFRAG), which plays a crucial role in shaping corporate reporting standards in European Union (EU), is seeking comments, until May 21, 2024, on the Exposure Draft ESRS for listed SMEs.
ECB to Expand Climate Change Work in 2024-2025
Banking regulators worldwide are increasingly focusing on addressing, monitoring, and supervising the institutions' exposure to climate and environmental risks.
BIS Bulletin Examines Cognitive Limits of Large Language Models
The use cases of generative AI in the banking sector are evolving fast, with many institutions adopting the technology to enhance customer service and operational efficiency.
ECB is Conducting First Cyber Risk Stress Test for Banks
As part of the increasing regulatory focus on operational resilience, cyber risk stress testing is also becoming a crucial aspect of ensuring bank resilience in the face of cyber threats.
EBA Continues Momentum Toward Strengthening Prudential Rules for Banks
A few years down the road from the last global financial crisis, regulators are still issuing rules and monitoring banks to ensure that they comply with the regulations.
EU and UK Agencies Issue Updates on Final Basel III Rules
The European Commission (EC) recently issued an update informing that the European Council and the Parliament have endorsed the Banking Package implementing the final elements of Basel III standards