Since 2016 the ECB has published regular updates of its Supervision Newsletter in order to address those issues that are significant for the purpose of the EU supervisory framework. In this context, in August 2018 the ECB published an update of its Supervision Newsletter including five articles on the following issues: internal governance, real estate, recovery plan, Brexit, and supervision.


Supervision Newsletter – August 2018 (ECB)

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This Technical Note summarises the update of the Supervision Newsletter of August 2018, and the overview of Supervisory Banking Statistics with a referenced data of 1Q18 which was facilitated by the ECB.

Executive Summary

The ECB Supervision Newsletter includes information on the good governance in a changing environment, a mixed picture of the developments in residential areas, the ECB experience in recovery planning, the countdown for Brexit, and the creation of a common supervisory approach for smaller banks.

Scope of application

This Newsletter is aimed at any group people who might be interested and to the public in general. It aims to inform them about any relevant aspects they might have questions to, with respect to the financial sector.

Main content

  • Good governance in a changing environment. As a result of the ECB’s supervisory engagement and work on governance, four areas have emerged where banks need to make improvements in the coming period, including: fit and proper assessments, board independence, risk appetite framework (RAF), and risk data aggregation.
  • Development in residential real estate lending. As part of its ongoing analyses, the ECB has assessed the credit risks related to residential real estate exposures in euro area countries and has concluded that residential real estate exposures require closer scrutiny by supervisors.
  • Recovery planning. The ECB now shares with the banking industry the best practices it has identified in five areas: recovery options; overall recovery capacity (ORC); recovery indicators, playbooks, which are implementation guides for recovery plans; and dry runs.
  • Brexit. The ECB has announced that all banks affected by Brexit should act before March 2019 to mitigate the risk associated with losing access to the EU single market. Furthermore, the ECB will continue to closely follow banks’ preparations and will counter any effort by them to establish empty shells in the euro area.
  • Building a common supervisory approach for smaller banks. A common methodology will be applied to the annual supervisory assessment of all euro area banks, including the less significant institutions (LSIs), operating within the SSM framework.

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