Ignazio Angeloni, Member of the Supervisory Board (ECB representative), discusses the changing banking landscape, financial integration and consolidation, and how banks address fundamental challenges to stay ahead of the curve.
Balance sheets that are congested by non-performing loans are a huge burden for banks. They are a drag on profits and keep the banks from lending to the economy. By developing guidance, the ECB is proactively addressing these risks while learning from past experience.
The annual mapping of key risks for euro area banks showed that banks continued to strengthen and reduced some risks. But risks such as low profitability, high NPLs and unadjusted business models persist, leaving the picture largely unchanged.
As time ticks on towards March 2019, banks operating in the euro area through the United Kingdom have been preparing for a post-Brexit environment. Although the banks are making some progress in their relocation plans, they do not yet fully meet the ECB’s expectations.
The growing number of market players with fintech business models is leading to more fintech bank applications. The ECB has produced a guide on its approach to licensing fintech banks to increase both the transparency of the process and potential applicants’ understanding of it.
The European recovery and resolution regime was set up to strengthen confidence in the banking system and ensure long-term financial and economic stability even if banks have to exit the market, without exposing taxpayers to losses.
Open and continuous dialogue between banks and supervisors is a key supervisory practice. The approach developed as part of the SREP, based on formal and informal dialogues, ensures effective and mutually-beneficial interaction with banks during the evaluation and decision phases.
Three solvency and leverage indicators from ECB-supervised banks have been updated with end-2016 data, along with the quarterly publication on Supervisory Banking Statistics. Of the 121 significant institutions concerned only 2.3% report a leverage ratio below the indicative 3%.
…that since 2014 ECB Banking Supervision has replied to 112 letters from Members of the European Parliament and taken part in 13 hearings in the Eurogroup and 11 in the European Parliament? ECB Banking Supervision is accountable to the European Parliament, which represents European Union citizens, and to the Council of the EU, which represents Member State governments. Through these channels it routinely explains its work and underlying rationale to EU citizens and their elected representatives.