EBA sees significant improvement in the work of supervisory colleges in 2018 but efforts are still needed to enhance the risk assessment reports and the joint decisions

The European Banking Authority (EBA) published today its 2018 Report on supervisory colleges, which summarises its findings on the monitoring of supervisory colleges for the main cross-border European banking groups. Considering the progress observed in the functioning of colleges over the years, the Report mainly focuses on the quality of the colleges' deliverables and highlights examples of good practice. Overall, the EBA has identified significant improvement in the colleges' deliverables although further efforts are needed, in particular to ensure that the group risk/liquidity risk assessment reports form a real joint assessment of the group-wide risks.

The core of the Report focuses on some key observations regarding the 2018 cycle of supervisory colleges. These observations cover (i) organisational aspects of the colleges' work and interactions, (ii) colleges' deliverables and (iii) the key topics for supervisory attention in 2018.

On the organisational aspects of the colleges' work and interactions, the Report notices a relatively high level of convergence among the colleges in terms of form and conduct but observes that some areas for improvement remain, for instance regarding the timely distribution of meeting documents. Considering the ever-increasing importance of anti-money laundering and countering the financing of terrorism (AML/CFT), supervisory colleges are invited to discuss this topic on a regular basis.

Regarding the colleges' deliverables (the group risk/liquidity risk assessment reports, as well as the joint decisions on capital, liquidity and recovery plans), the Report highlights that, in general, significant progress has been made. However, in some cases, the group risk/liquidity risk assessment reports still tend to be a compilation of the findings and assessments of the individual competent authorities and the information provided does not always enable readers to easily form a thorough opinion on the various topics. Moreover, despite the improvements achieved in the quality of the joint decisions, the Report notes that, in general, the reasoning for the liquidity joint decisions was less robust than for the capital joint decisions.

Seven key topics for supervisory attention had been identified for 2018, namely, (i) non-performing loan cleaning, (ii) business model and profitability, (iii) information technology risk and operational resilience, (iv) internal governance, (v) Brexit, (vi) structural changes and (vii) the International Financial Reporting Standards (IFRS) 9. In general, in 2018, colleges of supervisors reflected these topics in their interactions.

The Report also sets out the colleges' action plan for 2019, which includes (i) the key tasks for supervisory colleges, as defined by the legal framework; (ii) the key topics for supervisory attention; and (iii) the EBA's approach for college monitoring in 2019.