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ECB supervisor says banks face more uncertain and interconnected risks

Reported · Written up by our desk · Central Banks

Frank Elderson, a senior supervisor at the European Central Bank, said banks are operating in a more complex environment shaped by factors including geopolitical fragmentation, rapid technological change, volatile energy and commodity prices, rising inflation, demographic shifts, and persistent climate and nature related risks.

According to the ECB, the challenge for supervisors is less about the sheer number of risks and more about a risk landscape that is increasingly uncertain, interconnected, and volatile, adding that supervisors should not try to monitor everything everywhere at once.

The ECB said effective supervision in that setting requires clearer, forward looking prioritisation, and described its current supervisory approach as built around three pillars: sharper risk prioritisation, simpler and more efficient supervision, and timely remediation.

The ECB also said it has learned that complying only with minimum capital requirements is not enough to ensure banks remain safe and sound.

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