The European Banking Authority (EBA) published today its 2016 annual assessment of EU supervisory colleges, which are established for the effective supervision of EU cross-border banking groups. The Report highlighted a number of achievements made by colleges in the course of 2016, including a good level and quality of engagement, and also identified areas for improvement as well as topics for supervisory attention for 2017. The Report relied on the EBA staff observations gained through their participation in colleges of supervisors and on the consolidated results of the individual college assessments conducted at the end of 2016.
Overall, the Report concluded that the level and quality of engagements in supervisory colleges have been further improved in 2016, in particular the quality and depth of the discussions.
The EBA staff observed that the group risk assessment reports, one of the key deliverables of colleges, provided a good overview of risk profiles, with all material risks being captured and a sufficient level of details included. Improvements are expected in the completion and sharing of the decomposition of capital requirements by individual risks.
In addition, the Report highlighted that the joint decision documents on capital and liquidity, which are the ultimate outcomes of colleges work, were well reasoned and contained information on and references to the conclusions of the Supervisory Review and Evaluation Process (SREP), as reflected in the group risk/liquidity risk assessment reports. The articulation of the own funds requirements (P2R) in the 2016 capital joint decision documents have been brought more in line with the SREP guidelines. In terms of the joint decision process, colleges have to ensure that substantial information is shared with college members in a timely manner.
Supervisory colleges were required, for the second year in a row, to assess group recovery plans for cross-border banking groups and to reach joint decisions in 2016. Securing a formal agreement was challenging in many colleges, as they had to deal with issues arising from the treatment of pre-existing individual recovery plans, which had been developed before the BRRD came into force, and the appropriate coverage of individual entities in the group recovery plans. These issues have led to delays in reaching a joint decision, to a partial decision or to a situation in which no joint decision could be reached.
Among the items which deserve supervisory attention in 2017 are the ongoing balance sheet cleaning and NPLs reduction for legacy portfolios and the sustainability of banks' business models.
For the first time, the report includes detailed information on the activity of colleges followed on a thematic and selected basis.
The tools the EBA applies to facilitate the effective functioning of colleges as well as the support and guidance the EBA provides to colleges throughout the entire joint decision cycle are also explained in the Report.
Notes to the editors
Colleges of supervisors are fundamental for the effective supervision of EU cross-border banking groups, as they bring together supervisors, for developing group risk assessments and reaching joint decisions on institutions' capital and liquidity requirements under Pillar 2 as well as on the assessment of institutions' group recovery plans. Their key role is to ensure a better quality of oversight of cross-border banking groups by means of effective cooperation among the involved supervisors.
As part of its mandate to promote the efficient and effective functioning of supervisory colleges, the EBA produces regular internal reviews on the functioning of colleges. These assessments are discussed with all 28 Competent Authorities across the EU so that best practices, areas for improvements and priority tasks going forward can be identified and shared.