ECB Publishes Supervisory Priorities for 2019 Under the SSM
ECB published its supervisory priorities for 2019, as part of the Single Supervisory Mechanism (SSM) in EU. The supervisory priorities build on an assessment of the key challenges facing supervised banks in the current economic, regulatory, and supervisory environment.
ECB Banking Supervision has identified sources of banking sector risk in cooperation with the national competent authorities, drawing on input from the Joint Supervisory Teams, ECB micro-prudential and macro-prudential analyses, and reports by international bodies. The key drivers of banking sector risks that were identified are: geopolitical uncertainties, the stock of non-performing loans (NPLs) and potential for a build-up of future NPLs, cyber crime and IT disruptions, potential repricing in financial markets, the low interest rate environment, banks’ reaction to new and existing regulations, euro area economic and fiscal conditions, cases of misconduct, developments in real estate markets, structural business challenges, non-bank competition, and climate-related risks.
To ensure that banks address these key challenges effectively, ECB Banking Supervision has reviewed and streamlined its supervisory priorities. In the light of the outlined risk situation, SSM has set the high-level priority areas for 2019, which include the following:
- Credit risk, including investigation of real estate exposures and follow-up on NPL addendum and guidance
- Risk management, including the assessment of banks’ governance procedures, targeted review of internal models, and liquidity stress tests
- Activities comprising multiple risk dimensions, including development of Brexit policy stance, dialog with banks in preparation for market risk rules
These priority areas are largely continuing from 2018, with the exception of business models as major supervisory activities in this area have now been finalized. Business models will continue to be supervised as part of the Joint Supervisory Teams’ day-to-day supervision, for example, in the context of the Supervisory Review and Evaluation Process, or SREP. For each priority area, a number of supervisory activities will be carried out. The full implementation of these various activities may span more than one year.
Related Link: Supervisory Priorities for 2019
Keywords: Europe, EU, Banking, Supervisory Priorities, Brexit, NPLs, SSM, SREP, ECB
Previous Article
IAIS Publishes Paper on Supervision of Insurer CybersecurityRelated Articles
BIS and Central Banks Experiment with GenAI to Assess Climate Risks
A recent report from the Bank for International Settlements (BIS) Innovation Hub details Project Gaia, a collaboration between the BIS Innovation Hub Eurosystem Center and certain central banks in Europe
Nearly 25% G-SIBs Commit to Adopting TNFD Nature-Related Disclosures
Nature-related risks are increasing in severity and frequency, affecting businesses, capital providers, financial systems, and economies.
Singapore to Mandate Climate Disclosures from FY2025
Singapore recently took a significant step toward turning climate ambition into action, with the introduction of mandatory climate-related disclosures for listed and large non-listed companies
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.
EBA Proposes Standards Related to Standardized Credit Risk Approach
The European Banking Authority (EBA) has been taking significant steps toward implementing the Basel III framework and strengthening the regulatory framework for credit institutions in the EU
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.