The European Central Bank (ECB) has published a document setting out its priorities for the single supervisory mechanism (SSM) for 2018:

  • banks’ business models and profitability drivers remain a priority for the ECB in 2018. Activities will focus on examining the evolution of banks’ profitability in the current environment and on assessing interest rate risk implications for banks;
  • credit risk also remains an important supervisory priority. Supervisory dialogue with banks will continue with a strong focus on examining non-performing loan (NPL) strategies and improving the timeliness of NPL provisioning and write-offs;
  • risk management. The ECB states that the following initiatives will receive special attention: (i) the targeted review of internal models; (ii) ICAAP and ILAAP; and (iii) IFRS 9 and other regulatory changes; and
  • multiple risk dimensions. This includes work relating to Brexit. The focus of activities will shift from preparatory work to practical implementation of policy stances. The ECB, together with Member State competent authorities will continue to assess banks’ plans to relocate activities from the UK to the euro area, including applications for the granting of banking licences. Special attention will be paid to compliance with the agreed policy stances, especially to avoid the establishment of empty shell institutions in Member States subject to the Single Supervisory Mechanism. In addition, the next supervisory stress tests for significant institutions will be conducted in 2018. There will be two complementary exercises: (i) a sample of large significant institutions will participate in the EU-wide stress test coordinated by the European Banking Authority; and (ii) the ECB will conduct an additional stress test for the remaining significant institutions not participating in the EU-wide stress test. The stress test exercises will feed into the Supervisory Review and Evaluation Process, strengthen banks’ own stress – testing and risk-management capabilities, and provide a quantitative assessment of banks’ risk profiles across various risk categories.

View ECB adopts SSM supervisory priorities for 2018, 18 December 2017