“Resilience needs to keep up with new challenges”

Interview with Helmut Ettl, Executive Director of the IMF and former Executive Director at the Financial Market Authority of Austria and Member of the Supervisory Board of the ECB, Supervision Newsletter

11 November 2026

You have been involved in banking supervision through several defining moments for Europe’s financial sector, from the aftermath of the global financial crisis to today’s much more integrated supervisory framework. Looking back, which experience most fundamentally shaped your approach as a supervisor?

The global financial crisis – there is no way around it. I joined the Executive Board of the Austrian Financial Market Authority in 2008, just as the crisis reached the country. There were days when we genuinely did not know whether depositors would still trust their banks the next morning. That taught me a lesson I have never forgotten: trust is quickly lost, but painfully slow to rebuild. Ever since, I have tried to ask the difficult questions early, while there is still time to act.

What continues to impress me, though, is how Europe responded. When the sovereign debt crisis showed how closely banks and their governments had become entangled, Europe chose cooperation over fragmentation. We decided that banking supervision should no longer stop at national borders, because risks do not stop there either. Being part of the European banking supervision from the very beginning has been one of the defining experiences of my career.

Austrian banks have long maintained significant operations across central, eastern and south-eastern Europe. How has that cross-border perspective influenced your views on risk, opportunities, resilience and the importance of European supervisory cooperation?

For Austrian banks, the region has been a genuine success story. It opened up fast-growing markets, and many of these economies gained modern financial systems in return. But the years before 2008 also showed the other side: rapid credit growth, a high share of foreign currency loans and subsidiaries that relied heavily on funding from their parent banks.

Austria’s answer was the CESEE Sustainability Package of 2012. This strengthened the capital base of internationally active Austrian banking groups, promoted more balanced local funding of their subsidiaries and enhanced recovery and resolution planning. It was a home-country measure, but it only worked because we implemented it together with the host authorities in the supervisory colleges. That experience has stayed with me in European banking supervision: even a well-designed national measure depends on cooperation across borders.

You were closely involved in the Sberbank Europe resolution case, as the parent bank was headquartered in Austria. What are your key takeaways on how authorities in Europe collaborated?

The resolution of Sberbank Europe remains one of the most significant supervisory cases I have experienced because it showed how quickly a geopolitical shock can turn into a banking crisis. Despite strong capital and liquidity ratios, confidence evaporated and deposit outflows accelerated within days. And as we know, capital absorbs losses, but cannot stop a bank run.

The case also demonstrated that European crisis management can work under extreme pressure. The ECB, the Single Resolution Board and national authorities had to take decisions quickly and coordinate across institutions and jurisdictions to preserve financial stability, protect depositors and achieve an orderly market exit.

One more thought beyond the resolution: this case would obviously have been much simpler to manage with a single European deposit insurance scheme in place. This third pillar of banking union is long overdue.

One of the key objectives of European banking supervision has been to ensure that banks can maintain lending to households and businesses through periods of stress. In your view, what have been the most important lessons from the recent shocks, from the COVID-19 pandemic to higher inflation and rising geopolitical risks?

Recent years have confirmed that the resilience built since the financial crisis is not a burden but a prerequisite for supporting the real economy. European banks entered the pandemic with far stronger capital and liquidity positions than in 2008. Together with public support measures, this allowed them to keep financing households and businesses precisely when the economy needed them most. In 2008, banks were part of the problem. In 2020, they were part of the solution.

The years that followed presented a different test: high inflation, the fastest monetary tightening in the ECB’s history and bank failures in other jurisdictions in spring 2023. European banks passed that test. No significant bank in the euro area got into serious difficulty, there was no contagion.

The broader lesson is that shocks rarely arrive in isolation, and rarely in the form we expect. Our task is not to prepare banks for the last crisis, but to ensure they can withstand the next one.

What risks do you believe supervisors should be paying closest attention to nowadays?

Naturally, much of their attention goes to new risks: geopolitics, cyber threats, artificial intelligence. They demand it. But what strikes me is how familiar many of today’s vulnerabilities look. The risks of 2008 are also alive and kicking. Leverage is building up again: in the financing of the AI investment boom, in leveraged bets in financial markets and in private credit. Much of it sits outside the banking system, but banks are often closer to it than it seems as lenders, counterparties or providers of credit lines. And where data are patchy and structures opaque, we risk discovering the interconnections only when markets turn. For that, supervisors need to keep asking the old questions: Who really carries the risk? How is it funded? And what happens when confidence disappears? And on top of that, they need to ask new questions about the new risks.

What are the challenges for banks when it comes to cyber resilience, artificial intelligence and operational dependencies changing the role of supervisors in the years ahead?

Cyber risk is not just an IT issue, but a core risk to business continuity. At the same time, banks increasingly depend on a small number of technology providers for everything from cloud services to AI models. That creates concentration risks that no single bank can manage on its own. It is an important step that we brought critical ICT providers within the scope of European oversight under the Digital Operational Resilience Act.

AI investment in the United States is on track to be larger than the railroad boom of the late 19th century. If the technology fulfils all expectations, we will see a massive transformation of our entire economy. If expectations prove overstated, by contrast, the market correction could be severe. Even if the outcome lies somewhere in between, banks face real trade-offs. How far can they push efficiency gains without creating new vulnerabilities? How reliable are AI-based processes once the experienced staff who could spot their errors are no longer there? And who is accountable when a model gets it wrong?

Our challenge is to make sure innovation can move forward while resilience keeps up with the new challenges. That will require us to ask new questions, build new expertise and keep adapting the way we supervise. The coming years will test our own ability to adapt just as much as the resilience of the banks we supervise.

There is a growing debate about how Europe can enhance competitiveness while preserving a strong regulatory and supervisory framework. How can supervisors contribute to this discussion without allowing the resilience that has been built over the past decade to be compromised?

Competitiveness is rightly attracting considerable attention. But it is wrongly presented as a trade-off against resilience. Well-capitalised banks are the ones that lend more, not less, and that can keep lending when the real economy needs it.

That does not mean everything should stay as it is. Supervisors can contribute in two ways. First, by looking critically at our own work: processes can be simpler, supervision faster and more consistent, and our focus firmly on material risks. Simplification is welcome, so long as it is not deregulation by another name. Second, by pushing to complete the banking union. As long as capital and liquidity are kept trapped within national borders, European banks cannot make full use of their own home market. We should contribute to competitiveness not by lowering resilience standards, but by reducing unnecessary fragmentation and helping complete the banking union. A strong European market will always be more competitive than 27 fragmented ones.

What do you see as the most important challenge for the Single Supervisory Mechanism in the years ahead?

We have come a long way. When the SSM was launched, everyone arrived with their own supervisory traditions, and sometimes we even used the same word to mean different things. Today, we share a common supervisory culture. The next step is to operate even more as one system, with common tools, common data and common ways of working, so that a bank is supervised in the same way wherever it is located in the banking union.

That also means looking at every supervisory decision from a European angle rather than a national angle. That is precisely what the SSM was created for.

What advice would you give to those who will shape the next chapter of European banking supervision?

Never take your independence for granted. Independence is not awarded once and then preserved forever. Every generation of supervisors has to live up to it again. Good supervisors will sometimes disappoint politicians, banks and even the public. That is inevitable. A supervisor who is primarily concerned with being popular has probably chosen the wrong profession.

Be ready to learn from mistakes. Institutions do not become strong by claiming never to make them, but by continuing to develop.

And never lose faith in the European project. Over the last decade, I have seen colleagues from across Europe move from defending national positions to solving common problems together. That may ultimately be the greatest achievement of the SSM. Institutions matter, rules matter, but trust between people matters most. After all, you never dance a waltz alone.