Supervisors raise risk tolerance and accelerate bank approvals
ECB Supervisory Board Vice-Chair Frank Elderson announced a shift toward higher supervisory risk tolerance and faster procedures at a Basel conference on September 30, 2026. The framework deprioritizes low-risk areas to focus on material risks and speed up banking decisions.
From months to seven days
Under the Next Level Supervision initiative, the ECB has accelerated several administrative processes.
Approval times for standardized securitisations dropped from three months to an average of seven days, while capital-related decision timelines fell from several months to under six days.
The supervisor reviewed over 100 guidance publications, discontinuing approximately 40 documents.
In addition, stress testing data points were reduced by around 55 percent, and fit-and-proper assessments were sped up via digital tools and artificial intelligence.
Elderson explained that the risk tolerance framework permits supervisors to accept residual risk in lower-priority areas to concentrate resources on root causes.
Enforcement beyond capital ratios
Beyond procedural speed, Elderson emphasized strict remediation through qualitative measures, periodic penalty payments, and structural business model changes.
He argued that formal capital compliance alone failed to prevent the 2023 banking turmoil.
Global coordination remains essential as non-bank financial intermediaries now manage over half of euro area financial assets, having doubled since 2008.
Supervisors must also address AI-driven cyber threats and quantum decryption risks emerging by 2030.
Less process, more blind spots
Streamlining procedures offers needed operational relief, but relying on discretion creates consistency risks across banks.
De-prioritizing secondary areas works in calm periods yet risks overlooking hidden vulnerabilities.
The framework will face its true test during the next liquidity shock.