Rules, governance, crisis management and innovation were the hot topics at the ECB Forum on Banking Supervision

The third ECB Forum on Banking Supervision, which took place on 6 November 2019, was entitled “Banking at a crossroads: resilience and innovation in an era of uncertainty” and focused on four key issues for European banks: rules and regulation, governance and ethics, crisis management architecture, and digital innovation. The event was attended by around 200 representatives from banks, regulatory and supervisory authorities, think tanks, consultancies, and the media.

The Forum coincided with the fifth anniversary of European banking supervision. In a keynote speech, Supervisory Board Chair Andrea Enria highlighted European banking supervision’s main achievements, while also outlining the ongoing challenges it faces. Much has been accomplished during the foundational phase of European supervision. However, Mr Enria stressed that more still needs to be done to fulfil the vision of a truly European banking market, in which safe and sound banks serve the economy. He explained that “It’s a task for all of us: banks, policymakers, national institutions, European institutions and many others”.

The Forum included four sessions – one for each key issue. In the first session high-level experts discussed whether rules and regulations were helping or hurting the banking industry. The panellists agreed that, while banks’ profitability had improved slightly, a number of factors continued to challenge the notion of banks reaping benefits from a more harmonised market. These factors range from the implementation of Basel III to obstacles at the national level, stress testing, technological innovation, shadow banking, sovereign risk-weighting and the completion of the banking union.

In the debate on governance and ethics in banking, the speakers addressed questions such as the following: whether this topic is now more relevant than ever before, given spectacular failings in recent years; whether monetary incentives undermine the idea that banks play a role for the greater good; and whether banks’ internal systems of checks and balances are working.

The third session looked at the architecture of crisis management, focusing on the frameworks for determining the failure of banks and for implementing resolution and liquidation measures. It was clear from the discussion that a number of issues still need to be resolved at the legislative level to reduce national discrepancies.

The final panel, on banking in a digital world, delved into how technological innovation can, and should, be used by banks and supervisory authorities to make the entire system more efficient, effective and competitive. Panellists agreed that banks that do not digitalise may not survive in the future and they encouraged European institutions to make more use of the sandbox approach.