Understanding these work programmes will help banks to prepare for discussions with their supervisory and resolution teams.
The ECB (PDF 52 KB) identified four supervisory priorities for 2018:
- Business model and drivers of profitability. This will include examining the evolution of banks' profitability in the current environment and on assessing interest rate risk implications for banks, including sensitivity analyses of banks' interest rate risk in the banking book.
- Credit risk, non-performing loans (NPLs) and credit risk concentration. The ECB will continue its focus on banks' NPL strategies and provisioning/write-off. In addition, the ECB will examine the concentration of banks' exposures in specific asset classes, rolling out its earlier focus on shipping portfolios to other asset classes such as real estate; and will focus on banks' collateral management and valuation practices.
- Risk management. The ECB will focus in particular on its Targeted Review of Internal Models (TRIM); consult on revised guidance on banks' ICAAP and ILAAP; monitor banks' implementation of IFRS 9; and assess banks' preparedness for other regulatory changes such as the NSFR and MREL requirements.
- Brexit preparations and stress testing. The ECB will conduct an additional stress test for significant institutions not participating in the EU-wide stress test.
The EBA (PDF 704 KB) groups its activities for 2018 under seven main headings:
- Regulation and policy framework - contributing the development of CRR2/CRD5 and BRRD2, and reviewing the consequences of the Basel Committee's revised market risk framework. [The Basel Committee's agreement on other parts of `Basel 4' (credit risk, operational risk and the output floor) was announced after the EBA's work programme, but the implementation of Basel 4 in the EU will presumably become a key part of the EBA's work in 2018 and beyond.]
- Data - strengthening the EBA's role in the collection, dissemination and analysis of data on EU banks, by expanding its data infrastructure and analytical capabilities; and improving banks' disclosures.
- Crisis management - promoting efficient and coordinated crisis management of credit institutions, investment firms and financial market infrastructure in the EU, including promoting end monitoring the development of resolution plans, the assessment of resolvability and the actions taken to address impediments to resolvability [it is not clear why the EBA is focusing on resolution in addition to the SRB's responsibilities in this area].
- The convergence of supervisory practices to a high standard and a consistent implementation of rules across the EU, while fostering proportionality in relation to policy developments.
- Identifying and analysing trends, potential risks and vulnerabilities; supporting efforts to resolve NPLs; and undertaking the 2018 stress test.
- Protecting consumers, monitoring financial innovation and contributing to efficient, secure and easy retail payments in the EU.
- Improving the efficiency and effectiveness of the EBA.
The SRB (PDF 1.73 MB) announced five main priorities for 2018:
- Strengthening the resolvability of banks, including oversight of national approaches to the resolution of less significant institutions.
- Completing resolution plans and finalising institution-specific MREL requirements for major banking groups.
- Preparing and carrying out effective crisis management, including enhanced monitoring of banks that require increased scrutiny.
- Operating the Single Resolution Fund (SRF), with a focus on investment strategy and the role of the SRF in a resolution.
- Internal efficiency and effectiveness.