On 9 October the Chair participated in an exchange of views on the execution of the ECB’s supervisory tasks.In 2019 ECB Banking Supervision continued to fulfil its reporting requirements towards national parliaments, as set out in the SSM Regulation. It is particularly evident from a “corporate” perspective, in that it focuses predominantly on outlining the bank’s contribution to sustainability objectives and on monitoring business opportunities arising from the growing demand for green financial products.Banks’ risk management approaches to climate-related and environmental risks(list of risk management approaches; number of banks)Source: ECB staff calculations based on a voluntary ECB-EBA market practices survey covering 24 significant institutions.Most of the banks surveyed reported that the potentially material risks were either physical or transition risks, but that there was room for improvement in terms of the incorporation of climate-related and environmental risks into their risk management frameworks (e.g. The aim is to assess whether salesSales of NPLs and foreclosed assets – by SSM SIs and LSIs in the sample countries during the period 2015-19 plus ongoingSources: Bank announcements, Credit Village, Debtwire, Deloitte, KPMG and ECB calculations.The finance literature has long studied the impact of balance sheet clean-ups on banks’ share prices and the wealth effect for sellers.The analysis also shows that the maturity of the domestic NPL markets and the characteristics of the domestic legal frameworks affect stock prices differently across jurisdictions. In particular, LSIs’ dependence on interest income exposes them to the negative effects of a prolonged period of low interest rates, and their smaller size and predominantly regional focus reduce their ability to diversify their sources of income and reduce costs. I understand that, from an individual bank’s perspective, low profitability and market valuations make it difficult to argue the case for mergers. More than 75% of the reduction over the three-year period is likely to be driven by outflows from non-performing portfolios, loan repayments, sales and write-offs.Banks are targeting older NPE vintages more aggressivelyIt is also positive that banks are targeting older vintages of NPLs more aggressively in their reduction plans. As banks become more digital, they become more exposed to cyber risks – or to generic IT risks stemming from outdated systems, for instance. This process is grounded in a legal basis that lays down the principles for defining objectives and sharing feedback in JSTsLastly, there were two programmes to increase intra-JST mobility. In October 2019 ECB Banking Supervision, in close cooperation with national supervisors, published its updated SSM Risk Map for 2020 and beyond.Risks related to the euro area economic environment have grown, together with concerns about sustainability of banks’ business modelsThe three most prominent risk drivers expected to affect the euro area banking sector during the period 2020-22 are (i) economic, political and debt sustainability challenges in the euro area, (ii) business model sustainability, and (iii) cybercrime and IT deficiencies. In this spirit, it continued to explain its activities via a wide range of communications channels in 2019, including the ECB’s banking supervision website and a number of social media networks. They did not provide a solid basis for the prudent management of capital and liquidity and thus institutions would need to improve them (further). IMAS contributes to efficient and harmonised supervisory activities by implementing processes such as the SREP, on-site inspections and authorisations procedures, accurately and effectively through automated workflows that track and record all relevant information. #BITCOINCASH +0.20% Along the way, we will strive to further simplify processes so as to reduce the burden for both supervisors and banks – which also means relying more on new technologies. It is true that banks bear the one but not necessarily the other, and this was part of the original problem. As part of the response, which aimed to ensure that banks are healthy and the banking system resilient, policymakers created European banking supervision, which is now in its sixth year.In this short time, European banking supervision has developed from a start-up to a more mature institution, well established as a rigorous and consistent authority. By holding two public consultations, the ECB engaged in meaningful dialogue with the public on the supervisory fee methodology. They carried out preparatory work on topics such as the SREP methodology and the simplification of processes in the SSM.The Supervisory Board took the majority of its decisions by written procedureOf the 117 banking groups directly supervised by the ECB in 2019, 34 asked to receive formal ECB decisions in an EU official language other than English (compared with 35 in 2018).The delegation framework was further extended in 2019One of the measures that significantly increased the efficiency of the decision-making process was the extension of the delegation frameworkFurthermore, the information flow to the Supervisory Board was streamlined, automated, and improved in terms of quality. Euro area banks still have high cost-to-income ratios: on average, they spend around 65 cent to earn a euro, much more than their international competitors. The aim was to further enhance transparency and communication around fit and proper assessments and to support banks in submitting complete and accurate applications. The 2018 exercise identified the following key risk drivers for the years 2019 and beyond: geopolitical uncertainties, the stock of NPLs and the potential build-up of future NPLs, as well as cybercrime and IT disruptions. Here, we need to make further progress to complete the safety net within the banking union. Markets Week Ahead: Gold, Dollar, Dow, Euro, AUD, PMIs & Job Data From a supervisory point of view, our job is to ensure that banks are safe and sound. The low profitability of banks in the euro area is, without a doubt, a serious concern for me as a supervisor. As a result, they become more vulnerable.
In parallel, the Latvian Financial and Capital Market Commission (FCMC) decided to impose a moratorium on AS PNB Banka, suspending financial activities with immediate effect. The roundtable allowed for an exchange of views on governance best practices and common challenges regarding that issue.
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