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Supervisory priorities and assessment of risks and vulnerabilities

We set supervisory priorities annually to determine our focus for the three years ahead. Although our priorities are always revisited once per year, they can be reviewed at any time if justified by developing risks.

We prioritise based on what we consider to be the key risks and vulnerabilities that supervised institutions face in the current economic, regulatory and supervisory environment.

SSM supervisory priorities 2023-2025

What are supervisory priorities?

Priority 1

Strengthening banks’ resilience to immediate macro-financial and geopolitical shocks

In the current uncertain environment, it is crucial that we ensure that the banking sector stays resilient and that banks address the impact of external shocks on their businesses.

Strengthening banks’ resilience

Key vulnerabilities

Shortcomings in credit risk management

Banks should address deficiencies in their credit risk management frameworks to boost their resilience to potential asset quality deterioration and to swiftly identify and mitigate any build-up of risks.

Credit risk management
Lack of diversification of funding sources and deficiencies in funding plans

Sound planning and diversified funding sources can help banks maintain reliable access to funding, also if funding conditions should become less favourable in the future.

Funding sources and plans

Priority 2

Ensuring that banks address digitalisation effectively and strengthen their management bodies’ steering capabilities

Banks should address persisting deficiencies in their digital transformation strategies and governance arrangements. Doing so can help make their business models more resilient and sustainable.

Digitalisation and steering capabilities

Key vulnerabilities

Deficiencies in banks’ digital transformation strategies

The banking sector continues to digitalise at pace. As supervisors, we will focus on ensuring that banks have sound strategies and adequate arrangements in place to address the challenges posed by these changes.

Digital transformation strategies
Deficiencies in operational resilience frameworks

Some banking activities and services are critical for the economy, and so must be shielded against disruption. This is also the case for third parties providing critical services on behalf of banks.

Operational resilience
Deficiencies in management bodies’ functioning and steering capabilities

Banks need to strengthen the composition and oversight capabilities of their boards. Better strategic steering capabilities will help address the challenges stemming from the constantly evolving environment in which banks operate.

Management bodies’ functioning and steering
Deficiencies in risk data aggregation and reporting

Properly setting up data aggregation and reporting means that bankers have the information they need to make well-founded decisions. This also pays off in times of crisis when critical decisions need to be taken rapidly.

Risk data aggregation and reporting

Priority 3

Stepping up efforts to address climate change

Risks associated with climate change are rapidly evolving and this has, among others, far-reaching economic implications. Banks must take action and adequately address these risks. They can also play a vital role in financing the transition to a greener economy.

Climate change

Key vulnerability

Material exposures to drivers of physical and transition risk

Banks will only be able to mitigate the risks they face if they adequately consider climate-related and environmental factors in their strategies, risk management practices and decision-making processes.

Physical and transition risks

How do we use the supervisory priorities and the risk assessment?

Aside from defining key focus areas for supervisors in the years ahead, supervisory priorities and risk assessments provide important input for the next Supervisory Review and Evaluation Process (SREP) and benefit from the outcome of the previous SREP exercise.

Supervisory Review and Evaluation Process (SREP)

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