In testimony to the European Parliament’s Committee on Economic and Monetary Affairs, European Central Bank Executive Board member and Supervisory Board Vice-Chair Frank Elderson reviewed how euro area banks absorbed recent shocks and set out how ECB Banking Supervision intends to keep supervision risk-based and proportionate while simplifying and streamlining its approach. For 2026-28, the stated priorities are to strengthen resilience in a fast-changing risk landscape and to ensure operational resilience in an increasingly digitalised financial system. Work will include assessing institution-specific geopolitical scenarios, continuing to evaluate climate and nature-related risks within the ECB’s prudential mandate, and intensifying supervisory focus on cybersecurity, third-party risk management and enhanced risk reporting capabilities. Banks were also encouraged to innovate responsibly by fully incorporating risks from artificial intelligence and crypto-assets into risk management, with a future digital euro framed as a potential support to banks’ business models and payment services if introduced. On simplification, the statement described reforms under way since 2023 to better integrate supervisory activities, increase use of proportionality and digital tools, and deliver clearer and faster outcomes without lowering supervisory standards, including through full implementation of the Supervisory Review and Evaluation Process (SREP) reform and accelerated decision-making. Elderson also pointed to the ECB High-Level Task Force on Simplification’s recommendations for potential regulatory change as inputs to the European Commission’s forthcoming assessment of the overall situation of the banking system, while reiterating support for completing banking union and advancing the savings and investments union.

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