The European Central Bank (ECB) has published a speech given by Danièle Nouy (Chair of the Supervisory Board of the Single Supervisory Mechanism (SSM)). The speech is entitled A year of the SSM – résumé and outlook.

In her speech Mrs Nouy highlights some of the added value of ECB banking supervision and then discusses some of the ECB’s priorities for the future.

In relation to future priorities Mrs Nouy notes:

• that for EU banks, the economic climate in the euro area poses challenges to their profitability. Banks are facing a seeming paradox: while prices of financial assets are rising, real investments in the euro area remain relatively low. Mrs Nouy states that if persistent low interest rates are also factored in, it becomes clear that banks will have to review their business models. Profit drivers are therefore likely be a priority for the ECB in 2016;
• the ECB is aware that some of the banks within the euro area still face significant credit risk; this is therefore likely to remain a key ECB priority with a focus on non-performing exposures and concentrations of exposures in areas like real estate. The ECB will be identifying other macro-level risks as focal points for its supervisory activities next year. Mrs Nouy mentions that new technological developments have exposed banks to new IT and cybercrime risks and she thinks that the ECB as a supervisor should be aware of this; and
• there are a number of important regulatory developments that will have a significant impact on those banks the ECB supervises. For example, the requirements for total loss-absorbing capacity (TLAC) as developed by the Financial Stability Board. The TLAC requirements will mean that the biggest banks will have to comply with an additional set of requirements and it will be the ECB’s job to ensure a smooth introduction.

View A year of the SSM – résumé and outlook, 1 October 2015