Timely remediation for more resilient banks

12 August 2026

The ECB is committed to reducing unnecessary complexity while maintaining the resilience of European banks. Following an external review of supervisory processes in 2023, ECB Banking Supervision launched an ambitious reform agenda, including the next-level supervision initiative, to make supervision more efficient, effective and risk-based. The Supervision Newsletter is covering some of the projects that are helping to streamline supervision without compromising on supervisory quality.

Authors: Florian Narring, Eva Catarineu Rabell, Erika Petritz and Stephen Woulfe

Ensuring the safety and soundness of European banks is at the core of the Single Supervisory Mechanism’s work. This requires supervisors to identify prudential weaknesses (“findings”) and request that banks take remedial actions (“measures”) to address them. As Sharon Donnery recently emphasised, “timely remediation by banks is one of ECB Banking Supervision’s key priorities”.

In this context, the findings and measures lifecycle plays a central role: supervisors identify findings, communicate related supervisory expectations and measures to banks, and follow up on remediation until banks have addressed the underlying issues. If a bank fails to remediate a finding in an adequately and timely way, supervisors may consider escalating the issue, e.g. through binding requirements or enforcement measures. Ultimately, banks are responsible for remediating findings and should have in place a robust governance and risk management culture around timely remediation.

As the Single Supervisory Mechanism enters its second decade, its supervision aims to be even more risk-based, effective and efficient, in line with the spirit of the reforms initiated with the external assessment of the SREP and the next-level supervision project. As part of those changes, ECB Banking Supervision is further streamlining its approach to ensure that remediation processes are tightly calibrated, focusing on the most material measures and fostering escalation by using more intrusive supervisory tools where necessary. This revised approach will result in simpler processes for banks, without compromising their resilience.

By the end of 2025 the stock of outstanding measures across significant institutions had gradually increased to around 12,000 – an average of around 100 measures per significant bank, ranging from very high to very low severity. While this reflects thorough supervision, it also raises the question of whether all underlying findings are equally relevant in the current environment, or whether some reflect priorities shaped by past circumstances. Conscious of this, in 2025 the ECB implemented the “tiered approach” for findings and measures, marking an even more ambitious step towards greater proportionality with regard to the underlying risk.

The tiered approach establishes a simplified follow-up process for low-severity findings stemming from any supervisory activity. It withdraws the obligation for banks to provide documentation and empowers them to close measures once taken, without additional supervisory scrutiny. This is now an established practice, along with a more risk-based approach applied by supervisors when findings and measures are created. Evidence now shows that both banks and supervisors have been increasingly concentrating their efforts on what matters the most: in 2025, the number of measures closed by ECB Banking Supervision was 1,200 more than the number created. In 2026, the stock has already fallen by a further 600.

Despite the material progress, ECB Banking Supervision will focus even more on its remediation approach. It will take a step further by launching a “refocusing exercise” in October 2026, which will critically review the stock of measures accumulated throughout the last years. This exercise will introduce a structured review of open findings and measures, considering their severity, age, prudential relevance, remediation status and the likelihood that further supervisory intervention may be required.

The exercise will bring important changes: it will enable supervisors to discontinue or simplify the follow-up of findings with limited prudential relevance and to prioritise those issues with the greatest prudential impact given their materiality, risk implications and alignment with supervisory priorities. For banks, this more agile process will reduce the previously required supervisory engagement for low-severity measures, allowing them to focus their resources on addressing the matters that pose the greatest risks.

At the same time, banks remain responsible for remedying all identified findings on a timely basis. This enhanced approach, embedded in the refocusing exercise, will be applied to the stock of outstanding measures as a one-off exercise.

The exercise will be accompanied by further process simplifications that will benefit banks and become part of the standard ECB supervisory approach from now onwards. For instance, the approach for internal models will be further simplified by lifting the requirement for banks to submit internal audit or internal validation verification for low-severity measures, bringing the treatment of internal model findings in line with the process applied across all other supervisory activities. In addition, ECB Banking Supervision will be more selective in the generation of low-severity measures, allowing less intense engagement on those for both supervisors and banks.

The new strategic approach to findings and measures will enhance consistency across banking supervision. Furthermore, stronger governance and monitoring of the timely remediation of findings will enable more effective practices across all joint supervisory teams. These efforts will be underpinned by enhanced tools for assessing and tracking open findings and measures throughout their entire lifecycle.

Embedding these principles across the SSM and concentrating supervisors’ and banks’ efforts on the most consequential deficiencies will help strengthen the European banking system, which underpins the European economy. The ECB will monitor the effects of this findings and measures refocusing exercise. It will also provide further updates in the coming months – both industry-wide and to individual banks on how this exercise impacts them.