Interview with l’Agefi

Interview with Patrick Montagner, Member of the Supervisory Board of the ECB, conducted by Franck Joselin, Fabrice Anselmi, Séverine Charon and Camille George

3 February 2026

To begin with, could you outline the background and aims of the two reports released by the ECB at the end of December?

Yes, the ECB published two reports in December. The main one, which ECB Vice‑President Luis de Guindos presented most extensively, came from the ECB’s Governing Council. It was intended as a response to the questions currently being asked. A high-level task force appointed by the Governing Council explored possible ways of revising banking rules, the implementation of which will depend on European Commission proposals and the subsequent legislative process.

The Governing Council had already set out some essential guardrails which may not have been fully understood: preserving the resilience of the European banking system as a whole – this was not a move towards unpicking the regulations; ensuring that supervision remains grounded in day‑to‑day contact with banks; and continuing the harmonisation of European rules, which is still incomplete because of disagreements either between Member States or the co‑legislators. And equally, maintaining international cooperation – notably through the Basel Committee – rather than turning inwards on ourselves.

The second report came from the Supervisory Board, of which I am a member, and which brings together representatives of the 21 euro area countries supervising the 112 largest banks. Entitled “Streamlining supervision, safeguarding resilience”, it aims to make our supervisory processes more effective and more focused, now that we have ten years of experience under our belts. Unlike the first report, the outcome of which will depend on what the European Commission proposes for the banking sector, the second contains concrete measures within our own remit. They will come into force gradually, in some cases as of 2026. The aim is to streamline our processes, make the best use of our resources and, drawing on our experience, refocus on the risks that matter to us most.

What were the real issues at stake in this report?

The former Chair of the Supervisory Board, Andrea Enria, had already launched the work on simplification. He had tasked a group of independent experts with reviewing the ECB’s practices, which had been built up over time with Member States but were sometimes seen as too cumbersome and repetitive, to the detriment of risk analysis.

The centrepiece of this push for a more agile, responsive, judgement‑based supervisory approach has been the overhaul of the Supervisory Review and Evaluation Process. In practice, this assessment of banks runs continuously, beyond the annual health check, which also guides our programme of inspections for the coming year or years. We wanted to shorten the assessment cycle and, through the letters we send to banks, produce more focused conclusions on key issues. We started this last year and will continue this work into 2026.

We chose to go public with these efforts because there is a legitimate debate in Europe, at a time when another major jurisdiction (the United States, ed.) has changed tack and is creating uncertainty. For the ECB, supervision must not act on a whim; it needs to be as predictable as possible for the supervised entities so that they understand what the supervisor has in mind and what it expects from them. That is crucial. It allows us to maintain a dialogue with banks, for example to steer them, without surprises, towards better assessments of climate risks, and now geopolitical risks as well.

The first report contains recommendations that have already triggered debate – particularly on simplifying capital buffers, applying proportionality for smaller banks, and the use of Additional Tier 1 capital. How do you respond to industry concerns?

The ECB’s Governing Council has made its proposals, but those of the Commission will follow, and then there will be legislative trilogue negotiations. Regarding capital buffers, the Governing Council’s intention was to make them easier to understand. They currently accumulate in a rather complex way. The aim would be to consolidate them, for example in two major buffers*, so that capital management is clearer for banks, supervisors and the market. But this is not about lowering capital requirements.

As for proportionality, the EU has made a clear choice: all depositors deserve the same level of protection. We do not want to create second-tier banks. We want to avoid the scenario seen elsewhere, where lighter rules for some banks led, in times of stress, to a flight of deposits to institutions seen as safer. That said, we do support improving the regime for small and non-complex institutions to reduce reporting burdens without affecting the substance of prudential requirements. This is similar to the simplified rules applied in the insurance sector under Solvency II.

What about the sensitive issue of Additional Tier 1 capital?

The Governing Council has been very prudent. Adjusting capital instruments is the same as adjusting the financial market equilibrium that has been built over the last ten years. After the Credit Suisse incident, there were discussions about the genuine capacity of these instruments to absorb the losses of going concerns. The Governing Council is calling for greater legal certainty – and to make sure investors understand the risks involved – rather than fundamentally calling these instruments into question, which could trigger a shock. There isn’t such a clear distinction between instruments for going concerns and instruments for dealing with bankruptcies. There tends to be more of a run-up to failures; banks don’t suddenly move from positive to negative territory, and supervision is generally designed to prevent the latter from happening.

What about stress tests?

Responsibility for stress tests is shared with the European Banking Authority. The European Systemic Risk Board provides the macroeconomic scenarios and as supervisor, the ECB conducts the stress tests of the biggest banks and incorporates the results into the prudential process. We have noticed that the stress tests have become very cumbersome and that they use up a lot of everyone’s time and energy. The goal is to lighten the load and revise the methodology to make it more efficient while maintaining what is an essential tool for supervisors (and for banks).

A stress test is not designed to predict the future. It tests the resilience of balance sheets when faced with hypothetical shocks – at individual and group level. The most recent main takeaway is that the primary source of protection for European banks is their profitability levels, which have recovered.

What are the key measures outlined in the second report on your own supervisory practices?

We want to prioritise the most material risks in order to avoid spreading ourselves too thin. This means closer integration of our Joint Supervisory Teams – who have direct daily contact with the banks as part of a vertical setup – with our thematic experts, who conduct inspections in a more horizontal set-up. In addition, delegating more tasks would help speed up certain authorisation processes through the use of secure, fast-track assessments like the ones we already have in place for securitisation and share buyback operations.

We also want to use artificial intelligence more to automate the analysis of large and repetitive documents so that we can focus our human intelligence on supervisory tasks that offer greater added value. We are focusing on ensuring our requests are more clearly worded so that they can be properly understood, including by bank board members who are not industry professionals.

Last of all, we pay very close attention to the cultural development of our teams here at the ECB and at national authorities to ensure they all receive relevant training, are well informed about the decisions taken by the Supervisory Board and its Chair, and that they speak with one single voice to the supervised entities to avoid any inconsistencies.

You have extensive supervisory experience in the insurance sector. Should banks take inspiration from insurance firms when it comes to assessing risk, particularly those that are climate-related?

Insurance firms have been exposed to long-term risks for much longer because that is their core business; they pay out insurance claims. They saw the shift in the pattern of losses linked to climate-related events, such as floods or the shrink-swell of clay soils, particularly in France and the United Kingdom, before anyone else did. There is a lot we can learn from their modelling capabilities.

Today we are seeing the emergence of a “protection gap”: insurance coverage is dwindling in some regions, which means that businesses are incurring heavy losses, which in turn has an impact on their ability to repay the banks.

We don’t ask banks to conduct climate policy but to assess climate risk, without going so far as to take preventative measures, which is what insurance companies do. The banks must come up with robust scenarios for these climate-related risks in the same way they do for traditional credit risk. Taking risks is part of a bank’s business, but these risks must be assessed throughout the entire funding life cycle. After several rounds of discussions to get the banks on board, everyone now agrees on the direction that needs to be taken.

A Spanish bank nevertheless incurred a penalty recently for a late filing related to this topic. Could others follow suit?

This is not a legal penalty in the strictest sense, but rather a periodic penalty payment for failing to deal with a request by the deadline set. This bank may not be the only one affected. But I do want to stress that the ECB never takes decisions on an arbitrary basis. These decisions are taken when there is a failure to comply with agreed timetables. There is an exchange of views, a right to be heard, an option to appeal, and penalties are always proportionate to the circumstances. This is what underpins the rule of law.