Supervision Newsletter Winter 2017
Interview
"Banks with high non-performing loans should set ambitious targets"
Sharon Donnery, Deputy Governor of the CBI and Chair of the ECB’s High Level Group on NPLs, speaks about the task of providing guidance to banks to help them tackle their NPL portfolios in a prudent and sustainable way.
In Focus
ECB Supervision zooms in on internal models
The ECB’s Targeted Review of Internal Models seeks to reduce unwarranted variability of risk-weighted assets by checking whether banks correctly apply their Pillar 1 internal models when calculating their own funds.
Key risks faced by the euro area banking system – a road map for 2017
The ECB’s annual evaluation of potential risks to the euro area banking system shows how low economic growth corrodes asset quality and hampers banks’ capacity to provide new lending.
Supervisory expectations on the implementation of IFRS 9
The new accounting standard, IFRS 9, introduces major changes for the accounting of financial assets, including the timely recognition of credit loss provisions and the development of robust internal controls.
Key data
New Supervisory Banking Statistics published
The ECB has published the second Supervisory Banking Statistics. They include standardised information on capital adequacy, risk exposure composition and asset quality, as well as the solvency and leverage ratios of the banks it supervises.
Recent Highlights
- 2 February 2017
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Speech by Ignazio Angeloni on the interaction between supervision and central banking
Elaborates on the clear separation between the supervisory and monetary policy functions of the ECB. This allows for a fruitful interaction between the two, but without undue influence on decision-making.Speech
- 30 January 2017
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Danièle Nouy interview with La Repubblica
Stresses that there are limits to Basel IV regulation and that banks could be more efficient to improve profitability. There are no risk-free assets, so banks should set aside more capital for sovereign exposures.Interview
- 25 January 2017
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Speech by Danièle Nouy on New Year’s resolutions for a stable banking sector
Elaborates on the supervisory priorities for 2017, the fit and proper assessment of bank managers and the recovery plans banks are required by the BRRD to draw up.Speech
- 16 December 2016
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ECB launches public consultation on the guide on materiality assessment for changes to credit risk models
Explains approval criteria for changes to internal models of directly supervised banks that are used to calculate capital requirements for counterparty credit risk (CCR) and credit valuation adjustment risk (A-CVA).Public consultation
- 15 December 2016
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ECB publishes supervisory priorities for 2017
Supervisory priorities for 2017 focus on business model and profitability risks, credit risk with a focus on NPLs, and risk management. Emphasis is also given to the effects of Brexit and competition from the FinTech sector.Supervisory priorities 2017
- 15 December 2016
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ECB publishes outcome of SREP 2016 and recommendations on dividends and variable remuneration for 2017
SREP 2016 revealed broadly stable capital demand for 2017 (changes for individual banks resulting from their own risk profiles). It included ECB-imposed liquidity and governance qualitative measures, and updated recommendations on dividends and bonuses.Supervisory Practices
- 28 November 2016
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Speech by Julie Dickson on dealing with the diversity of the European banking sector
Reflects on the diversity of the European banking sector and the progress towards harmonised banking supervision. Also takes stock of the current state of affairs in raising standards and dealing with inherited challenges.Speech
- 23 November 2016
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ECB launches public consultation on draft guidance on leveraged transactions
Guidance aims to ensure safe and sound origination and distribution practices to contribute to the smooth financing of the real economy.Public consultation
Upcoming Events
- 28 February 2017
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Bank conference on TRIM
Will present the new guide on the Targeted Review of Internal Models (TRIM), which focuses on credit risk, market risk and counterparty risk as well as some general topics on model governance and data quality. Participants will discuss the project and next steps before the on-site missions, as well as model selection for low default portfolios. The conference is by invitation only.
- 23 March 2017
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Annual Report: Publication and hearing
The "ECB Annual Report on supervisory activities 2016" will be published and Supervisory Board Chair Danièle Nouy will present the report to the Economic and Monetary Affairs Committee (ECON) at the European Parliament.
- 27 March 2017
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Annual press conference
Supervisory Board Chair Danièle Nouy and Vice Chair Sabine Lautenschläger will hold their annual press conference following publication of the Annual Report on 23 March to discuss developments in European banking supervision.
Did you know?
In 2016, ECB Banking Supervision completed 148 on-site inspections, which are in-depth investigations of risks, risk controls and governance with a pre-defined scope and time frame on the premises of banks. Another 37 on-site inspections continue into 2017.