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, the ECB published in May 2018 an update of its Supervision Newsletter including five articles on the following issues: Brexit, IFRS 9, anti-money laundering, bank failure, and sanctioning and enforcement.
Supervision Newsletter - May 2018 (ECB)
This Technical Note includes a summary of the content of the Supervision Newsletter, as well as 4Q17 Supervisory Banking Statistics provided by the ECB.
The ECB’s Supervision Newsletter for May 2018 focuses on the impact of a potential transition period for the Brexit, the credit institutions’ progress with the implementation of IFRS 9, the ECB’s Pillar 2 powers regarding anti-money laundering, bank failing or likely to fail, and the enforcement, sanctions and reporting breaches.
Scope of application
This Newsletter is addressed to stakeholders and general public, and it is intended to inform such stakeholders on relevant issues surrounding the financial sector.
- Brexit: impact of a potential transition period. The ECB and national supervisors expect banks to come up with credible Brexit plans as soon as possible. Banks that are planning to relocate activities to the euro area should send their authorization applications at the latest by the end of the 2Q18 to make sure that they can continue to serve their customers after 30 March 2019.
- IFRS 9: credit institutions’ progress with implementation. Institutions are doing relatively well on aspects related to the implementation of the definition of default and business model assessment. The main areas for improvement relate to the implementation of validation and back-testing, the incorporation of forward-looking information and the measurement of ECL.
- The ECB and anti-money laundering. The ECB cannot determine if breaches of AML legislation have taken place as that competence lies solely with the AML authority. Once such breaches have been established by the AML authority, the ECB can take the facts thus identified as given and use its Pillar 2 powers (mainly through the SREP).
- Bank failing or likely to fail. The procedure to declare a bank failing or likely to fail starts with the ECB declaration if certain conditions on authorisation, assets, debts or public financial support are met.
- Enforcement, sanctions and reporting breaches. Under the Single Supervisory Mechanism (SSM), the ECB was given the power to adopt enforcement measures and to impose non-pecuniary and pecuniary penalties. In this regard, the ECB has focused its sanctioning activity on the following areas: capital requirements, large exposures, liquidity, reporting obligations and governance.
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