The European Banking Authority (EBA) today published its annual assessment of EU colleges of Supervisors, responsible for the oversight of cross border banks. The report assesses how colleges have functioned during 2014 and identifies key activities for the effective oversight of EU cross border banking groups in 2015. The report introduces items for supervisory attention in 2015, including conduct risk, Information Technology (IT) risks and the need for effective decisions on recovery plans.
Colleges bring together banking supervisors, from EU as well as non-EU areas, to jointly supervise those institutions that operate in more than one EU Member State. They have a key role in ensuring effective cooperation and the consistent pan-EU application of the Single Rulebook.
The EBA's report notes that's advancements were made in 2014 in improving the efficiency of EU supervisory cooperation. In particular, colleges were important for effective coordination between national supervisors during the 2014 Asset Quality Review and the EU-wide stress test exercises.
In 2015, close monitoring of capital plans, as part of their regular risk assessments, will be vital as a follow up to last year's stress tests. This will ensure that EU banks preserve their strong capital positions and facilitate investigations of potential future weaknesses. In addition, supervisors will closely monitor credit risk management and undertake benchmarking of internal model outcomes. The activities of EU colleges of Supervisors in 2015 will also be marked by the new Bank Recovery and Resolution Directive (BRRD) which requires colleges to reach a joint decision on the assessment of recovery plans of cross-border groups. They will be supported in this process by the technical standards issued by the EBA.
The report also identifies the need for Supervisors to review conduct risk, and monitor and assess improvements in corporate governance of EU banks, so as to ensure sound ethical standards. IT risks will also feature on the 2015 agenda, as the vulnerability of outdated systems to cybercrime and outages was found to be on the increase in the course of 2014.
Notes to the editors
Enhanced cooperation between EU supervisory authorities strengthens the supervision of cross-border banking groups that operate both across more than one EU Member States and at a global level. Colleges of Supervisors are the vehicles for coordinating these supervisory activities. Under EU law (Article 51 and 116 CRD (Capital Requirements Directive 2013/36/EU)) colleges have to be established for European Economic Area (EEA) banks that have subsidiaries or significant branches in other EEA countries.
As part of its mandate to improve supervisory cooperation and convergence of supervisory practices, the EBA produces regular internal reviews on the functioning of Colleges. These reviews are discussed with all 28 competent authorities (CAs) across the EU so that best practices, areas for improvements and priority tasks going forward can be identified. Colleges of Supervisors are fundamental for the effective supervision of cross-border banking groups across the EU; they act as the coordination hub for supervisory activities, as well as the forum for joint risk assessments and joint decisions regarding banks' capital requirements.