European Central Bank Banking Supervision published its Annual Report on supervisory activities 2025, reporting that banks under its direct oversight remained well capitalised, liquid and profitable while setting out reforms to make supervision more risk-based and efficient. The report frames the 2026-28 supervisory priorities around strengthening resilience to geopolitical and macro-financial shocks and improving operational resilience, including compliance with the Digital Operational Resilience Act. The aggregate Common Equity Tier 1 transitional capital ratio of significant institutions stood at 16.1% in the third quarter of 2025, with a liquidity coverage ratio of 157% and a net stable funding ratio of 126%, while the non-performing loan ratio was 1.9% for the first three quarters. The 2025 EU-wide and ECB stress tests covering 96 supervised entities indicated resilience under a severe downturn and fed into the 2025 Supervisory Review and Evaluation Process results, where the overall score improved to 2.5 and overall capital requirements and guidance averaged 15.6% of risk-weighted assets, alongside lower average Pillar 2 guidance of 1.1%. Supervisory process changes referenced in the report include the first SREP cycle under the reform concluding in October 2025 with decisions adopted six weeks earlier than in previous years, DORA-aligned supervisory methodologies and reporting templates, and reporting simplification including an 18.5% reduction in data points in the 2026 short-term exercise package. Enforcement activity in 2025 resulted in EUR 8.77 million in pecuniary penalties, and one climate and nature-related risk enforcement case led to EUR 187,650 in accrued periodic penalty payments; the annual significance assessment classified 112 institutions as significant as of 1 January 2026. Completion of the SREP reform is due in 2026, alongside implementation of the broader “next-level supervision” project, including streamlined decision-making planned for the second half of 2026 and further proportionality and template simplification starting with the 2026 thematic stress test. A reverse stress test is planned for 2026 to identify bank-specific geopolitical risk scenarios, and a fast-track assessment process for standardised significant risk transfer securitisations became applicable in January 2026, with a fast-track process for low-risk own funds transactions expected to be operational from the first quarter of 2026.

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