On 11 July 2024, the European Central Bank (ECB) published a report that defines assessment criteria and sound practices for digitalisation. The report follows a survey on digitalisation involving all significant institutions under European banking supervision conducted in 2022 and a broad set of supervisory activities in 2023 including targeted reviews on the steering of digitalisation covering 21 banks. The assessment criteria and sound practices are grouped together according to three themes: business model impact, governance and risk management.
One of the sound practices that the ECB observed was banks’ supervisory board members engaging to enable a digitalisation strategy to be adequately defined and then oversee its execution. However, many banks that the ECB reviewed still had room for improvement in this area. Another sound practice was conducting a holistic assessment of the digital strategy’s impact on the bank’s overall risk profile which helps create a comprehensive picture of the risks related to digitalisation.
Going forward, the ECB states that it will expand the focus of its supervisory work to include reviewing the use of specific technologies more broadly. These include the deployment of artificial intelligence and related business use cases. The ECB will also continue to sharpen its focus on the impact of banks’ digitalisation strategies, including the risks and benefits of evolving opportunities and risk drivers of banks’ digitalisation efforts. It will also strive to better understand the linkage between banks’ efforts to evaluate digitalisation strategies and their decisions to make and measure investments.