European Central Bank Banking Supervision has published an interview with Supervisory Board Chair Claudia Buch in which she said euro area banks remain broadly resilient, supported by stronger capital and liquidity, improved profitability and a fall in non-performing loans to around 2% from an average of 7.5% in 2015. She said supervisory priorities are to strengthen banks’ resilience to macroeconomic and geopolitical shocks, including climate and environmental risks, and to ensure operational resilience against cyber risk and weaknesses in internal information systems. Buch said the ECB directly supervises around 112 major European banks and is working with them to assess how geopolitical stress scenarios would affect them and how they would respond. After a 2025 European stress test covering tariffs and financial market turmoil, supervisors are now running a reverse stress test that sets a 300 basis point capital loss and asks which adverse scenario would generate it, with aggregated results due in the summer. She also said the ECB is closely assessing banks’ links to private credit and other non-bank finance, where leverage and limited transparency could create risks. On supervisory reform, Buch said the comprehensive overhaul of the Supervisory Review and Evaluation Process decided in May 2024 will be completed in 2026, moving to a more efficient, effective and risk-based multi-year approach without lowering supervisory standards. The same approach is being extended to authorisations and fit and proper assessments. Fit and proper reviews that previously took around 100 days have been shortened significantly, while some less complex significant risk transfer approvals now take around ten days instead of three months. Further work planned for 2026 includes revising the ECB’s guides to banks to better explain supervisory interpretations and good practices, clarify that the guides are not legally binding, and explore more proportionate supervision and reporting obligations.
European Central Bank - Banking Supervision 2026-05-13
European Central Bank Banking Supervision says banks remain resilient and details a 300 basis point reverse stress test and SREP overhaul
The European Central Bank Banking Supervision published an interview with Supervisory Board Chair Claudia Buch, who said euro area banks remain broadly resilient, supported by stronger capital and liquidity, improved profitability and a decline in non-performing loans to around 2% from 7.5% in 2015. She highlighted priorities including resilience to macroeconomic, geopolitical, climate and environmental risks, operational resilience to cyber risk, and enhanced assessment of banks’ exposure to private credit and other non-bank finance, alongside new stress tests. Buch also outlined an overhaul of the Supervisory Review and Evaluation Process and related procedures, aiming for a more efficient, risk-based multi-year approach and clearer, more proportionate supervisory guidance by 2026.