On 4 May 2023, the European Banking Authority (EBA) published its annual report on convergence of supervisory practices in 2022.

In accordance with Article 107 of the Capital Requirements Directive IV, the EBA reports annually to the European Parliament and Council on the degree of convergence of supervisory practices. The report describes the effects of the different tools the EBA is using to ensure convergence in supervisory practices.

The report makes a number of findings including:

  • The EBA’s European Supervisory Examination Programme (ESEP) introduced 5 key topics for supervisory attention throughout the EU, namely the impact of the COVID-19 pandemic on asset quality, ICT, digital transformation, as well as ESG and money laundering/terrorist financing (ML/TF) risks. Overall, the 5 topics were adequately incorporated into Member State competent authorities (NCA) supervisory priorities, supervisory assessments and colleges’ work. However, NCAs are still in the process of building up their capacity to review the risks associated with digital transformation and ESG, and supervisory attention on these topics was not always homogenous.
  • ICT security and outsourcing risks are followed closely by NCAs and supervisory colleges, and weaknesses identified the need for close supervisory attention as they are still considered as high. Overall, NCAs were not yet engaged in a comprehensive review of digital transformation strategies and their implementation by institutions.
  • Environmental and climate risks are increasingly part of supervisory activities, but the depth of supervisory assessments depends of how institutions have integrated ESG risk in their business strategies, risk appetite and loan origination practices and their risk, governance and reporting framework.
  • The interactions and the organisation of the supervisory colleges were overall of a high quality, although improvements in some procedural aspects of joint decisions will still be sought. The EBA also found that cooperation and timely information exchange in supervisory colleges should improve when crisis events materialise.