Supervision Newsletter - February 2025

Feature

Sound risk data reporting is key

Banks’ risk data aggregation and reporting capabilities must improve, as issues with internal governance, data infrastructures and IT architectures have persisted for too long. The ECB has stepped up its efforts and will use all its tools to drive meaningful enhancements.

In focus

Securitisations: a push for safety and simplicity

The ECB has worked with the European Banking Federation to develop a fast-track process for assessing significant risk transfer in securitisations. It incentivises banks to create simpler securitisations and streamlines the assessment period, with testing set for early 2025.

Outsourcing trends in banking

Banks increasingly rely on outsourcing and spend nearly half of their budgets on IT services. Yet outsourcing chains are becoming both more complex and global, and concentration risks are on the rise. Operational resilience will therefore remain high on the supervisory agenda.

Key data

Less significant banks up capital as non-performing loans rise

The December report on less significant institutions (LSIs) urges banks to build up capital amid rising profitability to counter potential non-performing loan ratio increases. Data from Q3 2024 confirm that LSIs are strengthening their capital positions.

Significant banks show robust capital, profitability

Data from Q3 2024 show that the capital positions of significant banks are robust, with an aggregate Common Equity Tier 1 (CET1) ratio of 15.72%. Banks reported a double-digit aggregated annualised return on equity for the fourth time since Q1 2023.