On 19 December 2023, the European Central Bank (ECB) published the results of its 2023 Supervisory Review and Evaluation Process (SREP) and its supervisory priorities for 2024 – 2026.
The SREP is an annual exercise in which ECB supervisors examine EU banks’ risks and produce capital requirements and guidance for each individual bank (which is in addition to legally required minimum capital). Among other things the 2023 SREP found that the euro area banking sector continued to be strong and resilient. On average, banks maintained solid capital and liquidity positions, well above regulatory requirements. Overall, the average SREP score broadly remained unchanged with Pillar 2 requirements for common equity tier 1 (CET1) capital set at 1.2% on average, compared with 1.1% previously. Also, CET1 capital requirements and guidance increased from 10.7% to 11.1%.
The ECB’s supervisory priorities for 2024-2026 include supervised entities being asked to strengthen their resilience to immediate macro-financial and geopolitical shocks, as well as accelerate the effective remediation of shortcomings in governance and the management of climate and environmental risks and make further progress in their digital transformation and building robust operational resilience frameworks.
The ECB has also published the introductory remarks made by its chair at the press conference on the 2023 SREP results and supervisory priorities for 2024 – 2026.