On 2 May 2018, the European Central Bank (ECB) published a speech by Supervisory Board Member Ignazio Angeloni.

At the beginning of his speech Mr Angeloni touches on Brexit stating that it will “require more cooperation and exchange between authorities and market participants across the Channel, not less, although the modalities will be different.” He adds that, “Brexit will not mark the end of cross-border banking and financial activities between the UK and the Continent, but it will make them more complex, more costly and, at least initially, more uncertain.”

Mr Angeloni then describes some of the key measures taken by the ECB’s banking supervision arm since inception covering:

  • achieving a sounder capital base;
  • reducing credit risks posed by the high level of non-performing loans; and
  • improving the quality of supervision which includes fostering harmonisation, convergence, transparency and even-handedness across the banking system.

In the latter part of his speech Mr Angeloni briefly elaborates on four strategic directions for the ECB:

  • enhancing the quality of supervision;
  • strengthening the focus on markets. Two factors have suggested that more supervisory attention should be redirected onto market risks. First, the expected normalisation of interest rates is accompanied by higher volatility in the financial markets. Second, Brexit will be a “game changer” as regards the mix of business models in the euro area;
  • strengthening macro-prudential linkages which include: (i) commonly agreed methodologies for systemically assessing the consistency of capital buffers applied to “other systemically important institutions”; (ii) adopting a similar approach for countercyclical buffers; and (iii) further developing crisis management and prevention frameworks. In particular strengthening legislation in the area of governing “early intervention” actions undertaken by supervisors in the initial phases of a crisis and creating a European authority for combating money laundering.