Supervision Newsletter November 2019
Interview
"Capital requirements for banks are levelling off"
Andrea Enria, Chair of the ECB’s Supervisory Board, says banks have become more resilient and supervisory expectations are stabilising. He also discusses mergers and why we need more transparency in supervision.
Full interview
In Focus
Profitability: banks expect to remain under pressure
Each year ECB Banking Supervision collects data on significant banks’ profitability and balance sheet projections. Based on the latest projections, it seems banks may need to step up efforts to ensure their business models remain sustainable.
Brexit: operational risk increases when banks delay action
The postponement of the Brexit date to 31 January 2020 should not be seen by banks as a signal to further delay implementing their Brexit plans. Banks which are lagging behind need to take action now to avoid increased operational risk.
Bringing artificial intelligence to banking supervision
Is there a place for artificial intelligence in banking supervision, a field that relies extensively on the expert judgement of supervisors? The answer is yes! Read on to find out how the ECB is exploring its potential.
Bank to the future: supervisors take on fintech innovation
Fintech has the potential to enhance banks’ business models, reduce their administrative burden and improve the experience of their customers. But the use of innovative technologies by banks goes hand in hand with new risks.
Less significant institutions are keeping up with IFRS 9
Nationally supervised banks have made substantial progress in implementing the accounting standard IFRS 9 and successfully incorporating it into their day‑to‑day practices. There are still a few points requiring attention, however.
ECB Forum discusses rules, governance, crisis management and innovation
The third ECB Forum on Banking Supervision brought together key stakeholders to discuss major issues in banking and supervision today, including regulation, governance, crisis management and digital innovation.
Check out the European Commission’s Finance Newsletter
Want to keep up to date with what the European Commission is doing in the area of banking and finance? Then subscribe to the Commission’s monthly Finance Newsletter for articles, interviews and news on major issues of the day.
Key data
ECB publishes Pillar 3 data on liquidity
For the first time, the ECB has published bank-level information on the components of the liquidity coverage ratio (LCR), including high-quality liquid asset amounts, cash outflows and inflows, and their respective breakdowns. Aggregate LCR figures continue to be published on a quarterly basis. At the euro area level, the LCR has been trending upwards in recent years, standing at 146.83% as of Q2 2019, compared with 137.64% in Q3 2016.
Did you know...
…that European banking supervisors have identified economic, political and debt sustainability challenges in the euro area as the most prominent risk driver affecting the euro area banking system over the next three years? The top three risk drivers, identified in ECB Banking Supervision’s risk assessment for 2020, also include business model sustainability and cybercrime and IT deficiencies. Risks stemming from easing lending standards and a possible no-deal Brexit are also highlighted. An overview of the results is presented in the SSM Risk Map, which serves as a basis for defining the ECB’s supervisory priorities for the next twelve months.
Upcoming Events
- 21 November 2019
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Andrea Enria to give keynote speech at ESBG Retail Banking Conference
The Chair of the Supervisory Board will give a speech in Brussels on Basel III completion and developments in sustainable finance.
- 12 December 2019
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European Parliament – regular hearing of Supervisory Board Chair Andrea Enria
The Chair will discuss current issues related to banking supervision with the members of the Economic and Monetary Affairs Committee (ECON) at the European Parliament.
- 28 January 2020
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ECB Banking Supervision press conference
The Chair and Vice-Chair will present the aggregate SREP results and answer questions on developments in European banking supervision.
- 30 January 2020
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Andrea Enria at the 5th European banking supervision and European Banking Federation boardroom dialogue
The Supervisory Board Chair will speak about regulatory and supervisory developments.
Recent Highlights
- 12 November 2019
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Speech by Andrea Enria on the implementation of Basel III
Stresses the need to implement Basel III faithfully as it strikes the right balance between the model-based and standardised approaches for calculating capital requirements, while legislators must not yield to lobbies or national interests.Speech
- 6 November 2019
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Speech by Andrea Enria at the ECB Forum on Banking Supervision
Elaborates on what has been achieved during the last five years in European banking supervision and on what more needs to be done to make the most of the banking union and make our banks safer and sounder.Speech
- 30 October 2019
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Speech by Andrea Enria on the state of the banking union
Explains that the banking union is still an incomplete construct and that it is important to establish the European deposit insurance scheme to deal with a banking market that remains segmented along national lines.Speech
- 7 October 2019
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ECB publishes the results of the sensitivity analysis of liquidity risk
Analysis shows that the vast majority of directly supervised banks have overall comfortable liquidity positions and that long survival periods under the severe shocks leave banks significant time to deploy contingency plans.Press release
- 7 October 2019
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ECB publishes its supervisory priorities for 2020
Based on the risk assessment for 2020, ECB Banking Supervision will focus on helping banks to continue to repair their balance sheets and strengthen their future resilience, as well as on other topics such as Brexit.Publication
- 2 October 2019
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Interview with Andrea Enria in the Times of Malta
Argues that the ECB as prudential supervisor and the national authorities as AML supervisors must take money laundering risks very seriously as they can affect not only banks but also the reputation of a country’s financial system.Interview
- 26 September 2019
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Speech by Andrea Enria on the future of stress testing
Discusses how splitting stress tests into a bank view and a supervisory view – with a constrained bottom-up approach and top-down models for quality assurance – could help make them more realistic, relevant and efficient.Speech
- 17 September 2019
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Presentation by Andrea Enria on post-crisis repair and banks’ profitability
Elaborates on how post-crisis repair via more capital, NPL reduction and reviewing internal models has led to more resilient banks and examines a list of remedial actions to improve the banks’ disappointing profitability.Presentation
- 9 September 2019
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Speech by Pentti Hakkarainen on the greening of the financial sector
Explains that regulators, supervisors and central banks have joined forces and that, among other things, we need to classify “green” and “brown” assets, while climate risks must be integrated into the supervisory framework.Speech
- 28 August 2019
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ECB and ECA agree Memorandum of Understanding
MoU will facilitate European Court of Auditors’ audits on ECB Banking Supervision, while highly confidential documentation will be protected and access to sensitive bank-specific information will be granted in a controlled environment.Press release
- 22 August 2019
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ECB revises supervisory expectations for prudential provisioning of new NPLs
Decision made after taking into account the adoption of a new EU regulation outlining Pillar 1 treatment for NPEs that complements existing prudential rules and requires a deduction from own funds when NPEs are not sufficiently covered.Press release