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Supervision Newsletter November 2020

Interview

"Joining European banking supervision marks a key milestone for us"

What can Bulgarian and Croatian banks expect from European banking supervision? Martina Drvar from the Croatian central bank and Radoslav Milenkov from the Bulgarian National Bank discuss what’s in store and their priorities.

Full interview

In Focus

Good governance in times of crisis

Banks are having to adjust certain governance arrangements in response to the coronavirus (COVID-19) pandemic. What are good practices in this crisis, what actions would raise red flags in supervisory assessments and where is further effort needed?

Full article

COVID-19: the impact on Europe’s smaller banks

Small and medium-sized banks play a key role in the European economy but the fallout from the current crisis could affect their asset quality and solvency, as struggling companies have spillover effects on banks.

Full article

Brexit: banks should prepare for year-end and beyond

Banks need to prepare for the end of the Brexit transition period to ensure that the EU financial system remains strong. Supervisory expectations are clear, but some banks are yet to complete their to-do lists.

Full article

Bolstering fit and proper supervision

Can the ECB improve fit and proper supervision even though the underlying rules are not yet harmonised across Europe? Yes – it will implement more efficient processes, enhance assessment scopes and provide additional guidance to banks.

Full article

Ramping up climate-related and environmental risk supervision

With its guide on climate-related and environmental risks, the ECB is stepping up its efforts to make banks more resilient to physical and transition risks. Banks’ practices will be subject to increased supervisory scrutiny.

Full article

Key data

Pillar 3 data on encumbered assets

According to Pillar 3 disclosures of significant banks in the euro area, the share of encumbered assets had been trending downwards in recent years, but increased to 22.15% in Q2 2020, up from 19.26% in Q4 2019. Reconciliation efforts resulted in significantly improved data consistency.

Supervisory banking statistics

Did you know...

… that submitting information to the ECB for supervisory processes, exchanging documents or reporting a breach of EU law is only a click away? Through the ECB’s new Banking Supervision Portal, all banks will soon be able to initiate and track fit and proper assessments and share confidential information with their dedicated supervisory teams securely, quickly and efficiently. The Portal is also the entry point to our external whistleblowing platform that allows stakeholders to report suspected breaches in a secure and protected way. More supervisory processes will be added to the Portal over time, creating a one-stop shop for banks and other stakeholders.

Banking Supervision Portal
Upcoming Events
18 November 2020

Andrea Enria and Elizabeth McCaul at the 7th Annual Conference on the Banking Union organised by Goethe University

The Chair of the Supervisory Board will speak about ECB Banking Supervision’s approach to longer-term risks such as climate change. The ECB representative to the Supervisory Board will take part in a panel discussion on the regulatory agenda for the decade ahead.

25 November 2020

Kerstin af Jochnick to participate in the Sustainable Architecture for Finance in Europe (SAFE) Frankfurt online Conference

ECB representative to the Supervisory Board will discuss the impact of the pandemic crisis on the banking union project and on bank capitalisation and resolution.

30 November 2020

Pentti Hakkarainen at the ECB’s Supervision Innovators Conference

ECB representative to the Supervisory Board will speak about the ongoing digitalisation of ECB Banking Supervision processes.

3 December 2020

Andrea Enria in conversation at the Financial Times online Global Banking Summit 2020

The Chair of the Supervisory Board will discuss the immediate and long-term implications of COVID-19 for the outlook for the banking sector.

16 December 2020

Andrea Enria to speak at a meeting with the Italian Banking Association

The Chair of the Supervisory Board will talk about ECB Banking Supervision’s priorities for 2021.

16 December 2020

Elizabeth McCaul at the EIFR webinar on regulatory issues

ECB representative to the Supervisory Board will discuss the relationship between regulation and supervision.

Recent Highlights
5 November 2020

Interview with Andrea Enria in De Tijd and L’Echo

Explains the reasons behind the proposal for a European asset management company and warns that the second wave of the pandemic could have a significant impact on banks’ capital and asset quality.

Interview
4 November 2020

Speech by Elizabeth McCaul on the next stage of European banking supervision

Argues that fortifying balance sheets now can bring considerable benefits in the future as it enables loss absorption and facilitates lending to viable businesses.

Speech
3 November 2020

Speech by Andrea Enria on the challenges of the pandemic and beyond

Suggests that the strengthened capital positions of banks helped the ECB respond effectively to the crisis. Banks must brace for weakening loan quality, proactively manage credit risks and tackle structural weaknesses.

Speech
30 October 2020

Speech by Elizabeth McCaul on COVID-19 and lessons in governance

Warns that the COVID-19 crisis is likely to lead to seriously impaired bank balance sheets and asset quality, and surviving it will require decisive management action and effective credit risk management.

Speech
29 October 2020

Speech by Kerstin af Jochnick on supervision in times of uncertainty

Explains that we need coordinated action to smoothen the eventual withdrawal of relief measures, while banks should give supervisors a realistic picture of asset quality and capital, and tackle long-term challenges.

Speech
27 October 2020

Opinion piece by Andrea Enria on bank asset quality and an asset management company

Urges quicker action and a deeper restructuring of the banking sector to avoid repeating past mistakes in dealing with bad loans. A European asset management company would be an effective solution.

Opinion piece
22 October 2020

Speech by Pentti Hakkarainen on banks’ cybersecurity

Notes that digital operational resilience in the banking sector has held up under the COVID-19 pandemic. But as cybercrime threats rise, banks must be vigilant and continue to improve their cybersecurity.

Speech
12 October 2020

Interview with Andrea Enria in Handelsblatt

Encourages banks to build up their capacity to deal with bad loans, and discusses the dividend recommendation and the need to address the structural weaknesses of the European banking market.

Interview
9 October 2020

Blog post by Andrea Enria and Edouard Fernandez-Bollo on cross-border integration of banking groups

Explains the need to foster the integration of cross-border banking groups to ensure timely intragroup liquidity support and sets out how recovery plans could be strengthened by using group support agreements.

The Supervision Blog
9 October 2020

Fireside chat with Kerstin af Jochnick on the priorities of ECB Banking Supervision amid the pandemic

Elaborates on the extraordinary measures the ECB has taken to help the banking sector during the COVID-19 crisis and explains how the recommendation on dividends helps address future uncertainties.

Fireside chat
1 October 2020

Speech by Andrea Enria on the evolving supervisory response to the pandemic

Notes that banks and supervisors should look beyond the pandemic and describes the evolving supervisory response to the crisis and what is needed so that banks can emerge from it stronger.

Speech
1 October 2020

Opinion piece by Yves Mersch on fit and proper assessments

Elaborates on the implementation of stricter and more intrusive fit and proper assessments. Greater harmonisation of national legislation is needed to reach even higher governance standards in European banks.

Opinion piece
18 September 2020

ECB finalises guide to assessing how banks calculate counterparty credit risk

The guide outlines the methodology used to assess how banks calculate their exposure to counterparty credit risk and advanced credit valuation adjustment risk.

Press release
17 September 2020

ECB allows temporary relief in banks’ leverage ratio after declaring exceptional circumstances due to pandemic

Banks under the ECB’s direct supervision may exclude certain central bank exposures from the leverage ratio until 27 June 2021. The move is aimed at easing the implementation of monetary policy.

Press release
11 September 2020

Speech by Yves Mersch on supervisory action in times of crisis

Explains why temporarily restricting dividend distributions was justified to support banks’ capacity to absorb losses without compromising their ability to continue lending to the real economy.

Speech