In an interview with Central Banking, Sharon Donnery, a member of the Supervisory Board of European Central Bank Banking Supervision, outlined the supervisor’s main current priorities for euro area banks. She highlighted three areas: strengthening resilience to geopolitical risk, speeding up remediation of outstanding supervisory findings, and ensuring banks have sound digital transformation and artificial intelligence strategies. She also positioned the ECB’s broader reform agenda as a simplification and modernization effort that should make supervision clearer, more risk-based and faster without weakening resilience. On geopolitical risk, Donnery said the 2026 thematic stress test uses a reverse stress-testing approach so banks assess their own business models and exposures rather than respond to a single common scenario. Banks were asked to identify scenarios that would lead to 300 basis points of capital depletion, with the ECB reviewing plausibility, data quality and peer comparisons across directly supervised banks. A report on key trends and findings is due later in the summer, and banks will receive mainly qualitative follow-up from their Joint Supervisory Teams. On remediation, she pointed to long-standing weaknesses such as risk data aggregation and said the ECB is considering how to escalate where progress is too slow, while also making supervision simpler through clearer SREP communication, a reformed Pillar 2 requirement methodology, shorter and more focused inspections, and better coordinated data requests. On digital and operational resilience, she said banks need to manage cyber, third-party, governance and recovery risks as digitalization and AI accelerate, in a framework that now includes the Digital Operational Resilience Act. Donnery also discussed policy proposals already put to the European Commission. These include raising the current EUR 5 billion threshold in the proportionality framework, subject to safeguards, and possible reforms to the Additional Tier 1 regime, while acknowledging that phasing out AT1 would require further work and could raise Basel compliance issues. She said the Commission will determine the next legislative proposals and reiterated the ECB’s commitment to implementing international Basel standards while simplifying rules and supervisory processes where complexity is unnecessary.
European Central Bank - Banking Supervision2026-06-23
European Central Bank Banking Supervision sets out priorities on geopolitical risk remediation and digital resilience
In an interview, Sharon Donnery said European Central Bank Banking Supervision is prioritizing geopolitical risk, faster remediation of supervisory weaknesses, and banks’ digital and AI resilience. She said the ECB will publish summer findings from its 2026 geopolitical reverse stress test and continue simplifying SREP, inspections and data requests. On rule changes, she pointed to proposals on proportionality and AT1 but said simplification should not weaken resilience.