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On-site inspections: a sharper focus for greater supervisory impact
Through on-site inspections, supervisors can gather direct evidence about how banks manage risks, make decisions, apply their internal policies and design their internal models. To serve this purpose, on-site investigations must use the resources of supervisors and banks in the most efficient, effective and risk-based way possible. This blog explains how the ECB is reforming its on-site work to make it more focused, timely and effective.
On-site investigations have been an essential tool for European banking supervision since its inception in 2014. We are now reforming how they are planned and conducted to make them more focused, timely and risk-based, while preserving the core principles that underpin effective on-site supervision.
Why are we strengthening our approach to on-site inspections?
On-site inspections focus on a wide range of topics and make it possible to observe how a bank operates and how it manages its risks, in detail and from within the bank itself. Supervisors can examine the actual situation at a bank, identify potential material weaknesses and assess the potential implications. This gives banks and Joint Supervisory Teams (JSTs) a clear basis for addressing weaknesses.
The resulting on-site reports provide first-hand information that feeds into the Supervisory Review and Evaluation Process (SREP). They help JSTs, which supervise individual banks, assess material weaknesses and determine the appropriate supervisory follow-up. They also inform the ECB Supervisory Board’s assessment of risks and priorities. In this way, on-site investigations contribute to the resilience of individual banks and the soundness of the banking sector as a whole.
While the national competent authorities (NCAs) provide the bulk of the staff carrying out on-site investigations in significant banks, they all apply the same methodology and supervisory practices. The European dimension has grown significantly since 2014: the ECB currently directly leads one-quarter of all on-site investigations, and the number of cross-border teams has increased substantially. In these diverse teams, the Head of Mission is from the ECB or an NCA other than the NCA of the country where the bank is headquartered. We remain committed to this pan-European approach to on-site supervision and are aiming for a roughly 50/50 split between cross-border missions and missions led by NCAs in their own country. This will allow a more harmonised approach.
For all these reasons, on-site supervision is a key element of our supervisory strategy. As part of its “next level supervision” initiative, the Supervisory Board reviewed the way we organise and conduct on-site investigations. The ECB has developed an action plan which draws on the experience of on-site teams, the findings of ECB’s internal control functions and feedback from the banking industry. Together, these different perspectives highlighted the need for a more focused process and careful consideration of the demands placed on banks.
A dialogue without predetermined outcomes
Banks should receive a precise description of the scope of an inspection before the work begins and receive answers to any questions they raise in good time. They should be told how the investigation will be conducted and have sufficient opportunities to discuss the evidence and challenge the team’s assessment during and at the end of the on-site phase. They should also be alerted swiftly when inspectors identify a potentially significant issue and should remain available for further exchanges with the team.
Banks can expect an investigation team to arrive with a clear mandate, build on information already available and focus its work on what it considers material to start with. They can expect inspectors to explain the findings, the supporting evidence and the prudential implications during the on-site phase, once the draft findings are available, as well as at the end of the investigation during the exit meeting.
We can meet these expectations if banks, in turn, provide timely access to information, systems and colleagues that can support the investigation. Open discussions during the inspection can resolve factual questions early and allow genuine disagreements to receive proper attention.
Of course, this predictability cannot extend to the content of the findings, and material observations should be discussed with the bank as they develop. Our process provides for this, giving the bank a meaningful opportunity to provide further evidence, correct factual misunderstandings and explain any disagreement with the team’s reasoning. It also ensures that the bank is informed of major findings before the exit meeting and the circulation of the draft report.
This dialogue does not prejudge the final assessment. It improves the evidence on which that assessment is based and enables both sides to understand the points on which they agree or differ. It also makes remediation more effective, as the bank has had an opportunity to understand what identified weaknesses are, and why they are significant.
Reinforcing the core principles of on-site investigations
On-site investigations require banks to devote time and resources to the process and to constant interactions with the ECB on-site teams. We therefore have a duty to organise our work efficiently and focus on activities that have the greatest supervisory value. We are strengthening the way information is integrated and exchanged between JSTs, horizontal and on-site teams so that existing knowledge and materials provided by banks can be reused across different supervisory activities wherever possible. Joint trainings and the growing participation of JST members in on-site inspections should also help the different supervisory teams work in a more integrated manner. Our aim is to keep information requests clearly linked to the scope of the investigation and to ensure that the conclusions appropriately reflect the materiality of the weaknesses identified.
Against this background, we are reaffirming our commitment to several core principles for the organisation and conduct of on-site inspections.
We are monitoring how time is managed through the on-site process, from the launch of the mission to the release of the final report to the bank and the JST. The timing of each phase of the investigation – pre-audit, on-site inquiries, writing the draft report, and carrying out consistency checks – needs to be more carefully respected. Consistency checks are essential to the quality and consistency of the reports because they ensure equal treatment and a level playing field for banks. However, these checks should reflect the need to remain risk-based, efficient and effective in our supervision. This focus on time is crucial: on-site reports are meant to share the main weaknesses identified, so they must reach the bank and the JST as soon as possible.
We have also reiterated the need for reports to be concise and clear in the way they present the findings. On-site reports should focus on the essential findings.
The planning of on-site inspections is becoming more closely integrated with the work of JSTs. This should reduce duplication, including unnecessary repetition of information requests to banks, make the inspection process smoother for banks and ensure that findings feed seamlessly into ongoing supervision. The on-site and the JST perspectives should inform and complement each other throughout the investigation and during the subsequent supervisory follow-up.
A new category of very targeted missions has been created, optimising the duration of investigations and the size of the teams. These missions can support the final closure of some open supervisory measures, for instance. New instruments have also been developed internally to enhance the efficiency of on-site investigations and their follow-up by JSTs. We have, for example, introduced an AI-based tool across the SSM that gives supervisors access to comparable findings and measures from across European banking supervision. By supporting quality checks and helping teams draft findings more consistently, the tool should contribute to clearer reports, a more level playing field and more targeted supervisory follow-up for banks. Credit file reviews are also becoming more risk-based, with their scope and intensity calibrated to the risks being investigated.
These efforts are already paying off. In 2026 on-site reports were around 20% shorter on average than in 2025, and the average time from starting an investigation to issuing the final report fell from 33 to 29 weeks. Duration and report length only tell part of the story of course, but the reduction shows that we can simplify the process while preserving the depth needed to reach robust conclusions.
Conclusion
On-site inspections will remain a central part of European banking supervision. We will continue to improve their planning, focus and execution, drawing on the contributions and expertise of the NCAs and the increasingly European composition of our teams. These teams have a clear objective: to provide, alongside and in close cooperation with the JSTs, a direct, independent and well-supported assessment of how a bank works in practice, and to ensure that material weaknesses are clearly and accurately characterised and can be followed up on and remediated effectively.
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