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Supervision Newsletter February 2022

Get the latest on banking supervision!

Interview

"The banks are not complacent"

Ana Botín, President of the European Banking Federation and Chair of Santander Group, talks about the post-pandemic risks to Europe’s banks, whether “too big to fail” is a concept of the past and what stands in the way of greater consolidation and competitiveness.

Full interview

In focus

Keeping an eye on real estate risk

Banks’ exposures to the commercial and residential real estate sectors are a key vulnerability. The commercial sector is vulnerable to the pandemic and the residential sector to risks of price corrections. The ECB is looking at how banks are managing this credit risk.

Full article

Reassessing bank directors’ suitability

Banks need to reassess whether a bank director is still suitable for the position if severe findings suggest that this may have changed, and they have to notify their supervisors. The ECB can also carry out its own reassessment, which it did for 17 cases in eight countries in 2021.

Full article

Suptech: from idea to reality

Two years after embarking on an ambitious digital transformation process, the ECB is incorporating the first new tools into its supervisory work. This and other technological solutions were at the heart of discussions at the ECB’s second global Supervision innovators conference.

Full article

SREP 2021: Banks resilient overall, but risks on the horizon

Banks’ capital and liquidity positions remain solid, but their internal governance and credit risk management need improvement. Supervisors will be keeping a close eye on banks’ exposure to risks related to climate change, non-bank financial institutions and bank operations.

Full article

Key data

Performing forborne exposures stabilise in Q3 2021

Performing forborne exposures stood at €233 billion in Q3 2021, largely stable compared to €227 billion in Q2 2021 but up by €107 billion since the low point in Q1 2020. Meanwhile, non-performing loans declined further in Q3 2021 to €401 billion, down from €423 billion in Q2.

Supervisory banking statistics

Did you know...

… that virtually all banks that carried out an adequate assessment of their climate risk practices expect climate-related and environmental (C&E) risks to have a material impact on their risk profile? Conversely, all banks which judged that they are not exposed to C&E risks had significant shortcomings in their assessment of these risks, the ECB’s analysis found. And while 59% of banks have looked into how exposed they are to climate-related risks, only 6% have done so for other environmental risks such as biodiversity loss and pollution. However, it is possible for banks to improve. For all but one of the supervisory expectations set out in the ECB’s Guide on C&E risks, at least one bank was already mostly or fully aligned in 2021.

The state of climate and environmental risk management in the banking sector
Upcoming events
22 February 2022
Elizabeth McCaul to speak at seminar on banking supervision with civil society organisations
ECB representative on the Supervisory Board will exchange views with representatives from European-level civil society organisations.
23 February 2022
Frank Elderson at Eurofi high-level seminar
The Vice-Chair of the Supervisory Board will talk about the financial sector’s achievements and challenges in the context of COP26.
24 February 2022
Elizabeth McCaul at Eurofi high-level seminar
ECB representative on the Supervisory Board will talk about ring-fencing practices in the banking union.
25 February 2022
Edouard Fernandez-Bollo at Eurofi high-level seminar
ECB representative on the Supervisory Board will speak about the diversity of banking models in the banking union, their added value and challenges.
15 March 2022
Andrea Enria to speak at Morgan Stanley European Financials Conference
The Chair of the Supervisory Board will speak about the situation in the banking sector as we emerge from the pandemic.
16 March 2022
Frank Elderson at 2022 Asia High-level Meeting on Banking Supervision
The Vice-Chair of the Supervisory Board will speak about the significance of climate risk for banks.
17 March 2022
Elizabeth McCaul at 2022 Asia High-level Meeting on Banking Supervision
ECB representative on the Supervisory Board will discuss regional supervisory priorities in the pandemic.
28 March 2022
Andrea Enria at the Belgian Financial Sector Federation
The Chair of the Supervisory Board will discuss the main challenges and opportunities for European banks at the current juncture and the need for a European deposit insurance scheme.
31 March 2022
Andrea Enria to present Annual Report to the European Parliament
The Chair will present the ECB Annual Report on supervisory activities for 2021 to the European Parliament’s Economic and Monetary Affairs Committee.
31 March 2022
Elizabeth McCaul at the Academy of the Leibniz Institute for Financial Research
ECB representative on the Supervisory Board will speak about corporate debt and bank balance sheets after the pandemic.
Recent highlights
12 February 2022
The ECB Podcast: how healthy are Europe’s banks two years into the pandemic?
Discusses the risks and emerging challenges banks face, how well-equipped they are to deal with them, and what supervisors are most concerned about.
The ECB Podcast: how healthy are Europe’s banks two years into the pandemic?
10 February 2022
Publication of 2021 SREP results
Results show that banks have solid capital and liquidity positions. Capital requirements and guidance have increased marginally to 14.4% in 2022 from 14% in 2021, while credit risk and internal governance remain key areas of focus.
Press release
10 February 2022
ECB announces no extension of capital and leverage relief
As banks have ample headroom above capital and leverage ratio requirements, they are expected to operate above Pillar 2 guidance again from 1 January 2023 and to include central bank exposures in leverage ratio from 1 April 2022.
Press release
27 January 2022
ECB launches 2022 climate risk stress test
Stress test to assess how prepared banks are for dealing with financial and economic shocks stemming from climate risk. The aggregate results will be published in July 2022 and there will be no direct capital impact on banks.
Press release
13 January 2022
Speech by Pentti Hakkarainen on the digital transformation of European banks
Argues that many fintech firms offer financial services in collaboration with banks and that the supervisor’s challenge is to preserve financial stability and prudential soundness while allowing for technological innovation.
Speech
12 January 2022
Andrea Enria holds exchange of views with European Affairs Committee and Finance Committee of French Senate
Discusses what digital transformation and the climate transition mean for banks and calls for greater urgency to complete the banking union. France’s presidency of the EU Council offers an excellent opportunity for progress.
Speech
21 December 2021
Interview with Andrea Enria in Het Financieele Dagblad
Argues that although there’s no urgency to establish a European asset management company it could nonetheless be useful in the medium term should NPLs start to mount up again at some point in the future.
Interview
17 December 2021
ECB announces it will not extend liquidity relief beyond December 2021
ECB returns to normal supervision of liquidity requirements as banks have ample liquidity buffers. All banks are expected to maintain a liquidity coverage ratio of above 100% as of 1 January 2022.
Press release
16 December 2021
Anneli Tuominen appointed as new ECB representative on the Supervisory Board
Ms Tuominen is Director General of the Finnish Financial Supervisory Authority (Finanssivalvonta – FIN-FSA) and in that capacity she is also a member of the ECB’s Supervisory Board. She succeeds Pentti Hakkarainen.
Press release
10 December 2021
Speech by Elizabeth McCaul on stress testing in banking supervision
Looks at how stress testing has evolved and suggests there may be further changes in the purpose and character of the stress test exercises towards assessing emerging risks in a more dynamic and integrated manner.
Speech
10 December 2021
Speech by Frank Elderson on climate-related and environmental risk management
Connects the different activities in the global policy community which demonstrate how the prudential supervision and management of climate-related and environmental risks is becoming a reality.
Speech
7 December 2021
Blog post by Andrea Enria on the supervisory priorities for 2022-24
Stresses that while credit risk remains high on the ECB’s agenda, we must also tackle emerging risks, including those stemming from accelerating digitalisation and the climate and environmental crisis.
The Supervision Blog
30 November 2021
Blog post by Elizabeth McCaul on provisioning
Describes the new bank-specific approach that the ECB is implementing to ensure that banks sufficiently provision for NPLs granted before 2019, and explains that a capital add-on will be imposed where necessary.
The Supervision Blog
22 November 2021
Blog post by Frank Elderson on how banks are managing climate and environmental risks
Explains that climate-related and environmental risks are key risk drivers and that banks must integrate these risks into their strategies, governance and risk management arrangements. Based on first-ever large-scale assessment.
The Supervision Blog
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