Supervisory priorities and assessment of risks and vulnerabilities

Banks should address deficiencies in their credit risk management frameworks to boost their resilience to potential asset quality deterioration.

Some sectors were hit harder by the pandemic than others. Banks’ exposures to these sectors need to be adequately monitored and managed.

The search for yield contributed to a further build-up of risks in leveraged loan markets. Supervisors will step up their efforts to ensure banks adequately manage risks in these segments.

Banks need to be prepared to cope with a potential repricing of financial markets. This includes medium-term interest rate and credit spread shocks.

The digitalisation of banking has picked up pace. As supervisors we will focus on making sure that banks have sound strategies and adequate arrangements in place.

Banks need to strengthen the effectiveness of their boards and their strategic steering capabilities to address the risks and challenges stemming from the constantly evolving environment in which they operate.