Featured Product

    ECB Annual Report Sets Out Supervisory Priorities for 2022-24

    The European Central Bank (ECB) Banking Supervision published a report on supervisory activities for 2021, a letter on supervisory expectations regarding the leveraged transactions of significant institutions, and a letter that clarifies differences in lending rates across member states.

    The annual report presents the work of ECB Banking Supervision in the year under review as well as its supervisory priorities for 2022-24. During this period, ECB aims to ensure that banks emerge healthily from the pandemic, seize the opportunity to address structural weaknesses via effective digitalization strategies and enhanced governance, and tackle emerging risks, including climate-related and environmental risks and information technology and cyber risks. For each priority, the ECB Banking Supervision developed a set of strategic objectives and underlying work programs, spanning the period 2022-24. The key planned supervisory activities of the ECB Banking Supervision are as follows:

    • Regularly monitor bank exposures toward vulnerable sectors, along with the targeted reviews of bank exposures to commercial real estate
    • Strengthen efforts to ensure that banks’ risk management practices are adequate, to prevent the build-up of unmitigated risks in the area of leveraged finance
    • Increase supervisory attention on risks posed by the excessive search for yield through regular Joint Supervisory Team engagement, targeted reviews, and on-site inspections
    • Intensify efforts to assess banks’ digitalization strategies
    • Carry out targeted initiatives to ensure that banks effectively address the identified deficiencies in the functioning and composition of their management bodies, with a focus on their collective suitability and diversity
    • Conduct a thematic review, in the first half of 2022, to assess banks’ progress toward incorporating climate and environmental risks into their business strategies and their governance and risk management frameworks. 
    • Conduct a climate risk stress test
    • Carry out targeted reviews and on-site inspections

    The annual report also highlights that, in 2021, the ECB Banking Supervision investigated climate and environmental risk disclosures of institutions. findings from this investigation will be published in a report and individual feedback has been already provided to each bank. In the letter on leveraged transactions, the ECB Banking Supervision specifies its expectations regarding the leveraged transactions of significant institutions, particularly regarding the establishment of risk appetite frameworks for leveraged transactions, in accordance with the good risk management practices set out in the ECB guidance on leveraged transactions. Finally, the letter on differences in lending rates across member states highlights that prudential requirements and differences in risk-weighted asset (RWA) densities are only one element to consider in explaining differences in mortgage loan interest rates. The prudential framework has been calibrated in such a way that higher risks are reflected in higher RWA densities, which in turn implies that higher capital requirements can be appropriate. in this respect, it is key that internal models appropriately measure risks. The letter further highlights that there are several measures in the Capital Requirements Regulation/Directive (CRR-CRD) review that will reduce unwarranted variability of RWAs across institutions.

     

    Related Links

     

    Keywords: Europe, EU, Banking, Climate Change Risk, ESG, Stress Testing, Basel, Regulatory Capital, Banking Supervision, Lending, Supervisory Priorities, Leveraged Transactions, ECB, Subheadline

    Featured Experts
    Related Articles
    News

    UK Authorities Consult on Implementation of Basel 3.1 Standards

    The UK authorities have published consultations with respect to the Basel requirements for banks. The Prudential Regulation Authority (PRA) published the consultation paper CP16/22 on rules for the implementation of Basel 3.1 standards.

    November 30, 2022 WebPage Regulatory News
    News

    ESAs Issue Multiple Regulatory Updates for Financial Sector Entities

    The three European Supervisory Authorities (ESAs) issued a letter to inform about delay in the Sustainable Finance Disclosure Regulation (SFDR) mandate, along with a Call for Evidence on greenwashing practices.

    November 15, 2022 WebPage Regulatory News
    News

    FSB and NGFS Publish Initial Findings from Climate Scenario Analyses

    The Financial Stability Board (FSB) and the Network for Greening the Financial System (NGFS) published a joint report that outlines the initial findings from climate scenario analyses undertaken by financial authorities to assess climate-related financial risks.

    November 15, 2022 WebPage Regulatory News
    News

    FSB Issues Reports on NBFI and Liquidity in Government Bonds

    The Financial Stability Board (FSB) published a letter intended for the G20 leaders, highlighting the work that it will undertake under the Indian G20 Presidency in 2023 to strengthen resilience of the financial system.

    November 14, 2022 WebPage Regulatory News
    News

    ISSB Makes Announcements at COP27; IASB to Propose IFRS 9 Amendments

    The International Sustainability Standards Board (ISSB) of the IFRS Foundations made several announcements at COP27 and with respect to its work on the sustainability standards.

    November 10, 2022 WebPage Regulatory News
    News

    IOSCO Prioritizes Green Disclosures, Greenwashing, and Carbon Markets

    The International Organization for Securities Commissions (IOSCO), at COP27, outlined the regulatory priorities for sustainability disclosures, mitigation of greenwashing, and promotion of integrity in carbon markets.

    November 09, 2022 WebPage Regulatory News
    News

    EBA Finalizes Methodology for Stress Tests, Issues Other Updates

    The European Banking Authority (EBA) issued a statement in the context of COP27, clarified the operationalization of intermediate EU parent undertakings (IPUs) of third-country groups

    November 09, 2022 WebPage Regulatory News
    News

    EU Finalizes Rules Under Crowdfunding Service Providers Regulation

    The European Union has finalized and published, in the Official Journal of the European Union, a set of 13 Delegated and Implementing Regulations applicable to the European crowdfunding service providers.

    November 08, 2022 WebPage Regulatory News
    News

    OSFI Sets Out Work Priorities and Reporting Updates for Banks

    The Office of the Superintendent of Financial Institutions (OSFI) published an annual report on its activities, a report on forward-looking work.

    November 07, 2022 WebPage Regulatory News
    News

    APRA Finalizes Changes to Capital Framework, Issues Other Updates

    The Australian Prudential Regulation Authority (APRA) finalized amendments to the capital framework, announced a review of the prudential framework for groups.

    November 03, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8597