Elderson outlines bank resilience and supervisory priorities for 2026-28
Frank Elderson, Vice-Chair of the ECB Supervisory Board, affirmed the resilience of European banks during challenging times. He outlined key supervisory priorities for 2026-28, focusing on simplification and addressing new risks like climate and cyber threats.
Europe's banks absorb shocks
Frank Elderson highlighted the proven resilience of European banks through a series of severe shocks since 2021. Banks successfully navigated the economic fallout from the pandemic, supported by solid capitalisation, strong supervisory measures, and fiscal and monetary policy.
They also withstood the economic impact of the war in Ukraine, proactively reducing exposures to Russia.
Despite rapid monetary policy tightening and heightened interest rate and liquidity risks that culminated in the March 2023 banking turmoil, European banks remained resilient.
Forward-looking risk assessments helped address vulnerabilities early, limiting repercussions for the sector and allowing monetary policy to reduce inflationary pressures.
Elderson stressed that early identification of vulnerabilities and decisive action are essential for a safe and sound banking sector, safeguarding financial stability, competitiveness, and cohesion.
Supervisory focus on new risks
Looking ahead to 2026-28, the European banking sector faces an external environment where risks are increasingly driven by external shocks.
Elderson outlined two key priorities: strengthening resilience to geopolitical shocks and macro-financial uncertainties, and ensuring operational resilience in a digitalised financial system.
Supervisors will assess institution-specific geopolitical scenarios and continue to evaluate banks' incorporation of climate and nature-related risks.
Operational resilience will focus on cybersecurity, third-party risk management, and enhanced risk reporting.
Banks are encouraged to innovate responsibly, fully integrating risks from artificial intelligence and crypto-assets, and preparing for the potential introduction of a digital euro to enhance business models and payment services.
Simplification without compromise
Elderson's push for supervisory simplification is a pragmatic response to increasing complexity, aiming to focus resources on material risks without lowering standards.
The emphasis on completing banking union and fostering capital markets integration underscores a strategic vision for a more resilient and competitive European financial system.
This agenda, if fully implemented, promises a more agile and effective supervisory framework, crucial for navigating future challenges.