Kilvar Kessler, ECB Supervisory Board member and Chairman of Estonia’s Finantsinspektsioon, discusses his experience with bank penalties and the lessons his supervisors have learned from anti-money laundering cases. He also cautions that an abundance of rules can stifle success.
Benefitting from advanced technology in supervision
The cutting-edge technology European banking supervision is using benefits supervisors and banks alike. Key projects to streamline data processes and enhance analysis capabilities ensure rigorous oversight while making the interaction with banks more transparent and more efficient.
SREP reform: towards more efficient and effective supervision
The reform is part of the ECB’s ongoing efforts to make supervision more effective and efficient. Decisions will become clearer and more focused. Supervisors will focus on the most severe findings, while relying on banks to address less critical issues without active follow-up.
To ensure banks’ internal capital adequacy assessment processes (ICAAPs) are solid, the ECB has enhanced its assessments, integrating them more closely into the SREP. Supervisors will have the flexibility to assess the ICAAP year-round and pick relevant issues for review.
Significant banks: sovereign exposures reaching new highs
Banks’ government exposures (incl. derivatives and off-balance-sheet items) stood at €3.13 tn at the end of 2024, the highest value since 2018 and €203 bn more than 6 months earlier. Growth was mainly driven by exposures to France (up €69 bn) and Spain (up €26 bn).
Less significant banks: return on equity continues its upward trend
Further growth in earnings enabled banks to increase their capital and reserves in Q4 2024. The seasonality affecting Q4 data mostly reflects loan loss provisions from the annual validation of loan classifications and transfers to internal reserves for general banking.
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