The European Banking Authority published today its Report on the functioning of supervisory colleges in 2017, which summarises the EBA's assessment of the colleges' activities against the EBA 2017 Colleges Action Plan and the relevant regulation. The Report concludes that significant improvements have been achieved over the last couple of years in college interactions, responsiveness, and in the quality, coverage and reasoning of the joint decision documents. Further efforts are, however, expected both from home and host supervisors to enhance the joint decision process and ensure the completeness of the SREP assessments.
On the organisational aspects of the colleges' work, the Report noted that closely monitored colleges maintained frequent, typically quarterly, interactions in 2017, and most of them ensured an active cooperation with the EBA staff too.
As to the risk assessments, the Report concluded that while they differed in terms of granularity across closely monitored colleges, all were a good summary of the supervisory evaluation. Nevertheless, there were no improvements concerning the timely distribution of mandatory annexes, covering capital and liquidity measures, in some affected colleges.
On joint decisions, the Report identified considerable improvements in the quality of both the capital and liquidity joint decisions of closely monitored colleges, with well-reasoned and clear references to the conclusions of the supervisory review and evaluation process (SREP). Also the granularity of information underpinning the required level of capital in the joint decisions has improved considerably in the vast majority of colleges, together with the articulation of the Pillar 2 capital requirement, including its compositions.
In around half of the closely monitored colleges, members were unable to reach joint decision on the assessment of group recovery plans mainly due to requests for individual recovery plans in addition to the group ones, resulting in either partial joint decisions or unilateral decisions. In this context, the EBA pointed out that not all available tools for reaching joint decisions have been used by the relevant authorities, in particular the option to resolve disagreements through mediation.
The EBA identified four key topics for supervisory attention for 2017, namely 1) non-performing loans and balance sheet cleaning, 2) business model sustainability, 3) operational risk including conduct risk and IT risk, 4) Comparability of risk-weighted assets (RWA) and the use of EBA benchmarks in SREP. The report also assesses the extent these topics have been reflected in the colleges' work program.
Note to the editors
Supervisory colleges are the fora for planning and coordinating supervisory activities, sharing important information about the supervised entity and most importantly for conducting the supervisory risk/liquidity risk assessment and reaching joint decisions on institution specific requirements and on the assessment of group recovery plan.
In line with its mandate to promote the effective and consistent functioning of supervisory colleges across the EU, the EBA monitored the activities of colleges established for the supervision of large cross-border banking groups. In addition to the ongoing monitoring, the EBA staff completed its year-end structured assessment of the 20 closely monitored colleges again in 2017, the outcome of which fed into this Report.