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
Previous ArticleDanièle Nouy of ECB on Role of Banking Supervision in NPL Resolution
Next ArticleOFR Introduces FSVM and FSI as New Monitoring Tools
FED finalized a rule that updates capital planning requirements to reflect the new framework from 2019 that sorts large banks into categories, with requirements that are tailored to the risks of each category.
ECB published results of the quarterly lending survey conducted on 143 banks in the euro area.
ESAs published the final draft implementing technical standards on reporting of intra-group transactions and risk concentration of financial conglomerates subject to the supplementary supervision in EU.
EBA published the annual report on asset encumbrance of banks in EU.
MAS revised the guidelines that address technology and cyber risks of financial institutions, in an environment of growing use of cloud technologies, application programming interfaces, and rapid software development.
FED updated the reporting form and instructions for the FR Y-9C report on consolidated financial statements for holding companies.
EBA issued a consultation paper on the guidelines on monitoring of the threshold and other procedural aspects of the establishment of intermediate EU parent undertakings, or IPUs, as laid down in the Capital Requirements Directive.
EC published Regulation 2021/25 that addresses amendments related to the financial reporting consequences of replacement of the existing interest rate benchmarks with alternative reference rates.
BIS published a bulletin, or a note, that examines the cyber threat landscape in the context of the pandemic and discusses policies to reduce risks to financial stability.
HM Treasury, also known as HMT, has updated the table containing the list of the equivalence decisions that came into effect in UK at the end of the transition period of its withdrawal from EU.