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In October, the European Central Bank (ECB) published its supervisory priorities for the coming year, providing the significant institutions it supervises, as well as other external observers, an insight into the areas where the ECB is seeking to improve standards or to assess the practices of banks. As the ECB itself notes, following years of long-running initiatives designed to strengthen banks’ balance sheets, its priorities have increasingly turned to areas relating to the resilience and sustainability of these banks.

In our report, (PDF, 4.6mb) KPMG’s ECB Office have analysed each of the supervisory priorities for 2020 in order to examine how the supervisory lens has changed over time and provide insight on the areas that banks should be considering over the coming year.

ECB Banking Supervision:

SSM supervisory priorities 2020

SSM supervisory priorities 2020 - Infographic

While the bulk of these topics have remained ever-present in the last few years of the ECB’s supervisory priorities, there is still a distinct ebb and flow to the areas considered. Some topics, such as those relating to internal models or NPLS, are more established and, in general, have a clearer sense of what is required as a result of supervisory horizontal analysis and detailed reporting. Other areas are still maturing, so the collection and assessment of practices through on-site inspections will be a more prominent feature.

What are the implications for banks?

Regardless, banks should not be fooled into thinking that the similarity of the 2020 priorities to last year’s indicates any kind of slackening of supervisory scrutiny. The ECB views on-site inspections as a powerful and effective supervisory tool, and even off-site supervisory activity will continue to be demanding. Banks can use these priorities to determine a bank specific heat map that differentiates between quick wins and long term projects, further preparing them for supervisory scrutiny around these topics.

We hope that this report can help you to consider how best to respond to the level of challenge and standards expected from the ECB.