Supervision Newsletter
November 2021
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"Our ultimate goal is to complete the banking union"
John Berrigan, Director-General FISMA, talks about the European Commission’s proposals to revise capital rules and introduce the Basel III output floor, climate risks, and whether the banking union glass is half full or half empty.
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Banks back to pre-pandemic profitability, but will it last?
Reversals of impairment flows have boosted net profits to pre-pandemic levels. The ECB has noticed early signs of deteriorating asset quality, so this quick rebound could be short-lived, and volatile income sources could drop to lower levels.
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In the spotlight: 2022 supervisory climate stress test
The upcoming stress test is a learning exercise and uses a modular approach adapted to banks’ levels of preparedness. The stress test will not assess entire balance sheets, instead focusing on specific assets relevant for the climate agenda.
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ECB Forum tackles hot banking topics
The fourth ECB Forum on Banking Supervision discussed the impacts of credit risk, climate change and slow banking market integration on banks. Although progress has been made in some areas, most speakers agreed that there is still a lot of work to be done across the board.
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NPLs down, Pillar 3 data more consistent
The aggregate NPL ratio fell further to 2.32% in Q2 2021, from 2.5% in Q1, driven by a decline in NPLs and an increase in total loans. Pillar 3 data on loans subject to COVID-19 measures were also published in November following a reconciliation exercise which improved data consistency.
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… that ECB Banking Supervision is on-site again? After more than a year of travel bans and compulsory teleworking, some elements of on-site inspections (OSIs) and internal model investigations (IMIs) are again being conducted at banks’ premises, when local rules allow. The ECB is following the evolution of the pandemic situation very closely. The ECB regularly sent inspectors on-site before the pandemic and launched around 270 missions per year (OSIs and IMIs). It has continued to examine banks during the pandemic, albeit off-site and sometimes with a tailored mission scope. This will continue for all missions where on-site presence is not currently feasible. Around 215 missions are expected to have been launched in 2021, with numbers likely to return to pre-pandemic levels as of 2022.
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Kerstin af Jochnick at the FRS Financial Stability Conference
ECB representative to the Supervisory Board will discuss the European Commission’s review of the crisis management and deposit insurance frameworks.
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Edouard Fernandez-Bollo at the 7th Annual Corporate Governance Conference
ECB representative to the Supervisory Board will analyse the ECB’s supervisory approach to EU bank governance.
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Andrea Enria to take part in the Fifth ESRB annual conference
The Chair of the Supervisory Board will talk about strengthening the financial system after the pandemic.
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Elizabeth McCaul at the Global Credit Risk Management Summit
ECB representative to the Supervisory Board will talk about Basel guidelines, modelling and stress testing, climate risk and technological advances in finance.
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Frank Elderson at the POLITICO Live Finance Summit 2022
The Vice-Chair of the Supervisory Board will discuss the ECB’s policies and the role of finance in fighting climate change.
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