Search Options
Home Media Explainers Research & Publications Statistics Monetary Policy The €uro Payments & Markets Careers
Suggestions
Sort by

Andrea Enria takes helm of ECB Banking Supervision

Andrea Enria, who became Chair of the Supervisory Board of the ECB in January 2019, has dedicated his professional life to promoting European banking integration through a unified system of regulation and supervision. He is determined to continue on the path of robust supervision that will help create a truly European banking sector.

“In the early years, ECB Banking Supervision established itself as a rigorous and independent supervisor. We now need to preserve and consolidate this important achievement,” observes Mr Enria.

Mr Enria was formerly head of the European Banking Authority (EBA), a position he took up in 2011, when the EBA was established. In that role, Mr Enria oversaw the preparation of what in 2015 he described as a “massive amount of standards and guidelines” designed to establish a single set of rules for the European banking sector. Under his leadership, the EBA was instrumental in developing, for example, a specific definition of bank capital, a common definition of non-performing and forborne loans, criteria to identify systemically important banks, the contents of recovery and resolution plans and the criteria for identifying banks that are failing or likely to fail.

Before his tenure at the EBA, Mr Enria had already worked on regulatory frameworks such as the single rulebook and collaborative supervisory practices, including as Secretary General of the Committee of European Banking Supervisors. The financial crisis added to the urgency of such efforts to harmonise regulation and supervisory practices.

The new Chair is resolute that European banking supervision must continue implementing best supervisory practices to ensure a level playing field for banks. “We need a strong resolve to develop the banking union into a genuine single jurisdiction, a true domestic market for European banks. That will foster healthy competition, to the benefit of depositors, investors and the European economy,” he adds.

Some remaining obstacles, such as those to cross-border mergers, need to be removed to achieve true banking union. As Mr Enria observes, “Consolidation is important to absorb the excess capacity generated in the run-up to the crisis. The cross-border dimension is essential if the banking sector is to play a role in absorbing shocks that hit an individual Member State. This would break down the sovereign-bank loop that has been so damaging in recent years”.

In many cases, achieving further changes will require legislative action, but Mr Enria also sees room for supervisors to consider whether existing supervisory policies and practices may have inadvertently generated some hindrances. “Comprehensive action by all policymakers is necessary if we are going to make the banking union a truly integrated system, a single jurisdiction,” he says.

Although many banks in Europe have managed to improve their performance, more needs to be done. Banks need to complete the clean-up of their balance sheets. “The faster banks get rid of legacy risk, the better they can lend to the economy,” he says, warning that “the banking union would not survive if the next crisis were to catch us still dealing with the legacy assets of the previous one or with a market segmented along national lines”.

This requires supervisory actions that exert pressure on banks to address legacy risks such as non-performing loans as fast as possible, with due consideration for their capital position and earning capacity. As Mr Enria points out, “By holding on to non-performing exposures, banks are doing a favour neither to themselves, nor to the economy. The faster banks dispose of these exposures, the more profitable they become and the better they can lend to the economy. They can also better protect themselves against adverse developments”.

In addition to legacy issues, Mr Enria would also like to see more attention paid to market risk. “In an increasingly volatile environment, market and funding risk will need to be monitored more closely. We need to be confident that banks value all their risky assets correctly. Knowing that our supervisors assess banks’ valuation practices from a European perspective should also reassure market analysts and investors that the risk-weighted measures of banks’ solvency can be trusted,” he says.

In a fast-changing and highly competitive environment, banks need to be willing to act on several fronts: performing in-depth analyses of their business models, tackling low-profitability, addressing the persistence of excess capacity in the system, and embracing new technologies. At the same time they need to ensure their resolvability.

Mr Enria also considers it vital for banks to continue working on governance and their business culture to ensure that internal safeguards are strong enough to prevent excessive risk-taking and that a culture of integrity permeates the banking industry at all levels. “The trust people have in banks is key for society as a whole,” Mr Enria says. “Banks need to restore and maintain that trust by adhering to the highest governance and ethics standards”.

In the area of transparency, Mr Enria plans to follow up on demands for greater supervisory openness and disclosure. This goes hand in hand with accountability. He sees the need for enhanced predictability of supervisory actions for all stakeholders, be they EU institutions, banks, investors or the general public.

“We need to reflect on whether we can achieve greater transparency and disclosure while respecting the confidentiality of the data we have and the decisions we take,” he says. “A system in which private investors have to share the burden of losses in the event of a crisis requires a high level of transparency, including in supervisory expectations vis-à-vis banks”.

CONTACT

European Central Bank

Directorate General Communications

Reproduction is permitted provided that the source is acknowledged.

Media contacts
SEE ALSO

Find out more about related content

Whistleblowing