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

    APRA Revises Related Entities Standard for Banks

    APRA published a strengthened prudential standard APS 222 on associations with related entities, with the aim to mitigate contagion risk within banking groups.

    August 20, 2019 WebPage Regulatory News
    News

    HKMA Revises Implementation Schedule for Initial Margin Rules

    HKMA intends to adopt a revised implementation schedule for the margin requirements for non-centrally cleared derivatives.

    August 16, 2019 WebPage Regulatory News
    News

    HKMA Revises Guideline on Application of Banking Disclosure Rules

    HKMA issued a revised version of the Supervisory Policy Manual module CA-D-1 on guideline on the application of the Banking (Disclosure) Rules (BDR).

    August 16, 2019 WebPage Regulatory News
    News

    ECB Decision on Recognizing Reporting Member States Under AnaCredit

    ECB has finalized the Decision 2019/1348 (ECB/2019/20) that establishes procedure for recognizing non-euro area member states as reporting member states under the AnaCredit Regulation (EU 2016/867).

    August 16, 2019 WebPage Regulatory News
    News

    FASB Proposes to Extend CECL Standard Deadline for Certain Entities

    FASB proposed an Accounting Standards Update that would grant private companies, not-for-profit organizations, and certain small public companies additional time to implement FASB standards on current expected credit losses (CECL), leases, and hedging.

    August 15, 2019 WebPage Regulatory News
    News

    IASB Adds Phase Two of IBOR Reform to Its Work Plan

    IASB (or the Board) has added the second phase of its project focused on potential financial reporting implications linked to the interest rate benchmark reform—interbank offer rate (IBOR) reform—to its work plan.

    August 15, 2019 WebPage Regulatory News
    News

    FED Updates Draft Instructions for Proposed FR Y-14 Reporting Forms

    FED updated draft instructions for the monthly, quarterly, and annual capital assessments and stress testing reports, also known as forms FR Y-14M, FR Y-14Q, FR Y-14A, respectively.

    August 15, 2019 WebPage Regulatory News
    News

    FASB Proposes Taxonomy Changes Related to Topics 326, 815, and 842

    FASB is proposing taxonomy improvements for the proposed Accounting Standards Update on clarifying the interactions among topic 321 on investments in equity securities), topic 323 on investments under equity method and joint ventures), and topic 815 on derivatives and hedging.

    August 15, 2019 WebPage Regulatory News
    News

    OCC Updates Bank Accounting Advisory Series in August 2019

    OCC released an update to the Bank Accounting Advisory Series (BAAS), which reflects accounting standards issued by FASB, through March 31, 2019, on topics such as hedging and credit losses.

    August 15, 2019 WebPage Regulatory News
    News

    APRA Consults on Final Phase Margin Rules for Uncleared Derivatives

    APRA is consulting on amendments to the prudential standard CPS 226 on margin and risk mitigation requirements for non-centrally cleared derivatives.

    August 14, 2019 WebPage Regulatory News
    RESULTS 1 - 10 OF 3656