Supervision Newsletter - August 2024
Interview
"Two wrongs don’t make a right"
Regulators should strive for a global level playing field but not at the expense of loosening standards, says ECB Supervisory Board Member Kerstin af Jochnick. ECB Banking Supervision has stepped up its transparency, as clear communication can help keep banks safe and sound.
Interview with Kerstin af JochnickFeature
Insights into commercial real estate valuations
Collateral valuation is a cornerstone of risk management, so the ECB has been assessing banks’ valuation practices for commercial real estate. Inspectors call on banks to ensure that they use up-to-date market information and carefully review their valuers’ work.
Feature on commercial real estate valuationsIn focus
Zooming in on leveraged finance
Following on from previous work, supervisors launched a comprehensive review of the leveraged finance portfolios of a set of banks. The review will conclude later in 2024 and can result in adjustments in risk classification and measurement on individual bank level.
Article on leveraged finance
Updating the guide to internal models
The ECB plans to update its guide to internal models in 2025. The update will include machine learning techniques in internal models and changes due to the revised Capital Requirements Regulation. Banks will be able to provide feedback on the planned changes.
Article on the guide to internal modelsKey data
Non-performing loans (NPL) ratios reversed downward trend in Q1 2024
The NPL stock of significant institutions rose by 4.6% year-on-year and 19.5% for less significant institutions. However, given the growth of total loans, the NPL ratio of significant banks remained stable at 2.3% and for less significant banks increased to 2.5%.
Supervisory banking statisticsDid you know...
… that we are reforming our annual health assessment of banks, also known as the Supervisory Review and Evaluation Process (SREP)? Over the past ten years, the SREP has helped us increase the resilience of European banks and establish a level playing field. Nevertheless, the risk environment has changed significantly since 2014. Responding to these changes is part of good supervision, so in May 2024 the Supervisory Board decided to recalibrate the SREP and other processes. The improvements will make European banking supervision more efficient and effective, and enable supervisors to take more rapid and robust action. Supervisors will gain more flexibility and be able to tailor their actions and focus areas more closely to individual banks. The SREP and related communications will be streamlined and supervisory methodologies will be more stable. The new SREP will be fully operational in time for the 2026 cycle, with changes to be implemented gradually starting in the second half of 2024.
Have a look at Claudia Buch's presentation- 5 September 2024
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Anneli Tuominen at Handelsblatt Banking Summit 2024
The ECB representative to the Supervisory Board will participate in a fireside chat focusing on cyber risks in the context of geopolitical risks.
- 17 September 2024
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Claudia Buch, Frank Elderson and Elizabeth McCaul at SSM Supervisory Culture conference
The Chair, Vice-Chair and ECB representative to the Supervisory Board will speak about organisational culture, risk tolerance and supervisory effectiveness.Programme
- 24 September 2024
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Elizabeth McCaul at ECIIA Banking Forum 2024
The ECB representative to the Supervisory Board will deliver introductory remarks on supervisory expectations concerning digitalisation and its associated risks.
- 26 September 2024
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Claudia Buch at 8th Annual ESRB conference
The Chair of the Supervisory Board will give a keynote speech on geopolitical risks in the context of banking supervision.Programme
- 16 October 2024
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Claudia Buch at Bocconi University
The Chair of the Supervisory Board will speak about profitability, focusing on recent regulatory developments and industry challenges.
- 4 November 2024
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Frank Elderson at European Banking Institute’s 10-year SSM anniversary event
The Vice-Chair of the Supervisory Board will deliver a keynote speech on the role of banking supervision in addressing climate risks.
- 6 November 2024
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Claudia Buch at ECB’s 10-year SSM anniversary event
The Chair of the Supervisory Board will give a speech followed by a fireside chat with her predecessors, Danièle Nouy and Andrea Enria.