WSBI-ESBG’s Managing Director advocates for proportionate banking supervision at EBI event

In his introductory statement, Mr Simon stressed the importance of striking the right balance between harmonisation and proportionality in banking supervision. Supervisory expectations and requirements should always be proportionate to the size, significance and riskiness of the supervised institutions. He also mentioned specific issues such as interaction between the Single Supervisory Mechanism (SSM) and National Competent Authorities (NCAs) as well as the transparency of the ECB decision making process.

The integration of climate risk considerations in banks’ risk management processes will continue to be one of the key ECB priorities for the next three years. Provided that prudential regulation should be risk-based, it was highlighted that the financial sector is continuing to progress in the identification, disclosure and management of these risks, and that banks’ efforts to sustain the economic transition keep on increasing.
Banks’ digital transformation is another key priority. The ECB wants to make sure that banks have a sound digital strategy in place . The role of the ECB would then be to check how adequate the risk management and governance structure of supervised institutions for a given digitisation strategy would meet minimum expectations..
Another important topic that was discussed is corporate governance including the Fit and Proper framework. Here ESBG explained the reasons why the ex-ante/ex-post assessment suitability of members of the management body should be a choice at national level.

Participants also discussed what banks should do to build resilience towards future macro-financial and geopolitical shocks. On this point ESBG stressed that today, banks – especially locally rooted savings and retail banks – are part of the solution thanks to their demonstrated solid capital and liquidity position which allows them to continue supporting companies and households even in time of stress.

In conclusion, ESBG called on EU policy makers to achieve better and more proportionate regulation and supervision, which would allow financial institutions to carry out their daily activities, such as lending to SMEs, under a non-detrimental regulatory framework.