Anneli Tuominen, head of Finland’s Financial Supervisory Authority and ECB Supervisory Board member, talks about the role of national supervisors in the European system, Nordea joining the banks supervised by the ECB and tighter mortgage rules in Finland.
A potential transition period that would last until 31 December 2020 could be instrumental in smoothing the UK’s withdrawal from the EU. However, the ECB would still expect banks planning to relocate to the euro area to apply for authorisation as soon as possible.
The ECB has assessed banks’ progress in implementing IFRS 9. They have made good progress with the definition of default and business model assessment, but need to improve validation and back-testing, incorporating forward-looking information and measuring expected credit losses.
As ECB Banking Supervision is not tasked with investigating anti-money laundering activities, it has to rely on investigations by other competent authorities. If they discover AML breaches, the ECB assesses whether and what prudential supervisory response is warranted.
As direct supervisor of significant banks, the ECB is also responsible for assessing whether a bank is failing or likely to fail. Since 2014, the ECB has made this determination for five banks. This set a process in motion that also involves the Single Resolution Board.
Under its sanctioning powers, the ECB has so far focused on breaches regarding capital requirements, large exposures, liquidity risks, reporting obligations and governance. By end-2017, it had imposed five penalties and submitted 12 requests to NCAs to open proceedings.
The non-performing loan (NPL) ratio has steadily decreased since 2015, reaching a weighted average of below 5% in the fourth quarter of 2017. About 60% of NPLs are to non-financial corporations and 36% to households. It should be noted that the ratio varies across euro area countries.
… that banks in the euro area again increased their lending to households by 2.9% in February 2018 compared to the previous year? The annual growth rate of loans to non-financial corporations stood at 3.1%. According to the Eurosystem’s bank lending survey, the increase was in part facilitated by banks easing their internal guidelines or loan approval criteria for loans to enterprises as well as for house purchase loans to households. The increased level of bank lending is a positive sign as it reflects the recovery of the euro area economy.