Elderson warns uncertainty tests banks' risk models
Frank Elderson warned that growing uncertainty challenges the assumptions underpinning banks' risk management. His keynote was prepared for the European Central Bank (ECB)-Bank of England conference in Frankfurt on October 14, 2026.
Historical patterns meet growing uncertainty
Elderson said banks have long relied on data, borrower behavior and historical patterns to estimate potential losses with reasonable precision.
Those estimates inform risk pricing, provisions for expected losses and capital held against large, unexpected losses.
He said this approach works well when underlying relationships remain broadly stable and has provided a useful basis for managing financial risks.
Banks already supplement their models with overlays, stress testing, underwriting, risk appetite setting and other processes.
However, he described the world facing banks as increasingly complex, interconnected and uncertain, questioning the stability of the environment on which those estimates depend.
Climate risk across three continents
The conference brought together experts from 18 countries and three continents to discuss resilience in a non-linear world.
Elderson identified climate and nature crises as its central theme, alongside geopolitical fragmentation, demographic change, artificial intelligence and quantum computing.
He is an ECB Executive Board member and Supervisory Board Vice-Chair.
The Bank for International Settlements lists an 11-page speech dated October 19, 2026; the keynote description gives October 14, 2026.
Precision rests on stability
Elderson's distinction is between estimating losses and relying on stable relationships to do so.
He notes that banks already use safeguards beyond models.
His opening frames resilience around growing uncertainty rather than announcing a specific supervisory measure.
Source: Ensuring resilience in the face of uncertainty
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