On 28 January 2021, the European Central Bank (ECB) published the outcome of its 2020 Supervisory Review and Evaluation Process (SREP) and announced its supervisory priorities for 2021. Based on the SREP analysis and taking into account the situation triggered by the pandemic, ECB Banking Supervision has decided to concentrate its efforts on four key areas materially affected by the COVID-19 pandemic, setting the following supervisory priorities for 2021:
- Credit risk. Supervisors will focus on the adequacy of banks’ credit risk measurement and management, with a view to fostering timely identification, efficient monitoring and the mitigation of procyclicality.
- Capital strength. The EU-wide stress test coordinated by the European Banking Authority will be at the forefront and will be an important element in gauging banks’ capital resilience, in addition to the continued supervisory review of banks’ capital planning.
- Business model sustainability. Banks’ strategic plans and the underlying measures taken to overcome existing structural deficiencies will continue to be challenged.
- The supervisory focus will remain on the adequacy of banks’ crisis risk management frameworks, risk data aggregation, IT and cyber risks, as well as anti-money laundering risks.