ECB Annual Report on supervisory activities

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• It provides banks with a consistent methodology for the recognition of NPLs and for the calculation of loan loss provisioning and write-offs in line with international recommendations and best practices. • It fosters enhanced disclosures of NPLs in order to increase market confidence. JSTs have started to actively engage with supervised banks to support the implementation of the guidance. Effectively reducing NPLs requires not only supervisory activities, but also legal and institutional reforms Addressing NPLs remains a key supervisory priority of European banking supervision. However, resolving NPLs depends on the actions of many different stakeholders; the issue cannot be tackled by supervisors and banks alone. Further regulatory and policy actions at the EU and national level are needed to remove obstacles that prevent banks from resolving their NPLs and restructuring distressed debt. <strong>ECB</strong> Banking Supervision, together with the NCAs, conducted a stocktake of national supervisory practices and legal frameworks concerning NPLs in eight euro area countries. A final report also covering the remaining euro area Member States will be published in the course of 2017. Some countries have taken proactive and coordinated prudential, judicial and other measures to tackle the issue. Other countries could further improve their legal and judicial framework to facilitate the timely workout of NPLs. In addition, secondary markets for NPLs need to be developed in order to facilitate sales of distressed assets. In this context, it is necessary to foster the development of an NPL servicing industry, to improve data quality and access to data, and to remove tax and legal impediments to debt restructuring. 1.2.4 On-site supervision Second cycle of on-site inspections 185 On-site inspections were approved for 2016 The planning of on-site inspections was further improved in 2016 The second cycle of on-site inspections was part of the overall 2016 supervisory examination programme (SEP) planning that was approved in January 2016. In July 2016 the semi-annual planning update cancelled some on-site inspections and approved additional ones for the second half of the year. In total, 185 on-site inspections were approved for the year 2016. To further develop and improve the planning of on-site inspections, the following strategic actions were implemented in 2016 and used for the 2017 planning cycle. First, a targeted engagement level formalises the enhanced risk-based approach by providing indicative targets for the number of missions per institution and topic over a three-year horizon. Second, the blind spot tracker identifies potential inspection gaps or outliers that still need to be addressed. Third, the duration of the missions is shortened to optimise the timely treatment of their findings. <strong>ECB</strong> <strong>Annual</strong> <strong>Report</strong> on supervisory activities 2016 − Supervisory contribution to financial stability 19
Chart 4 On-site inspections mainly focused on credit risk, governance and operational risks Number of inspections by main risk category Credit Governance Operational (incl. IT) Capital Profitability Liquidity IRRBB Market 0 10 20 30 40 50 60 70 On-site inspections are planned and staffed in close cooperation with the NCAs, which continue to provide most of the heads of mission and team members. As of 31 December 2016, the NCAs had provided 167 or 90% of the heads of mission while 10% of the heads of mission were provided by <strong>ECB</strong> Banking Supervision. Table 1 Authorities providing the Head of Mission Total OSI approved <strong>ECB</strong> Non-home NCA Home NCA 185 18 9.73% 17 9.19% 150 81.08% In 2016 <strong>ECB</strong> Banking Supervision led 18 missions across euro area countries. The primary focus was on credit risk, with capital requirements a close second. Cross-border staffing of missions is now supported by an on-site inspection tool, “Market Place”. This instrument enables all NCAs to access the list of forthcoming on-site inspections which are suitable for staffing by mixed/cross-border teams 12 , and to register their interest in participating in, or leading, these on-site inspections . In total, 74 mixed-team missions took place, accounting for 40% 13 of the total number of on-site inspections. 12 13 Meaning at least one on-site inspector is not a national of the country where the bank is established. Including JST participation in on-site inspections. <strong>ECB</strong> <strong>Annual</strong> <strong>Report</strong> on supervisory activities 2016 − Supervisory contribution to financial stability 20
Page 1 and 2: ECB Annual
Page 3 and 4: 5.2 Feeing framework 2016 67 6 Lega
Page 5 and 6: Introductory interview with Danièl
Page 7 and 8: Speaking of banks, how are the Euro
Page 9 and 10: European banking supervision has th
Page 11 and 12: exposed banks to ensure that they w
Page 13 and 14: The quantitative impact of the adve
Page 15 and 16: Figure 2 gives an overview of the S
Page 17 and 18: 1.2.2 Work on other methodologies T
Page 19: Figure 4 Ratio of non-performing lo
Page 23 and 24: The IT risk methodology was also re
Page 25 and 26: Based on the assessment methodology
Page 27 and 28: the year, JSTs actively monitored t
Page 29 and 30: frequency, duration and resources.
Page 31 and 32: Finally, the ongoing cooperation be
Page 33 and 34: 2 Authorisations, enforcement and s
Page 35 and 36: Annual assessment
Page 37 and 38: Table 5 Most authorisation procedur
Page 39 and 40: towards harmonisation by developing
Page 41 and 42: Chart 5 Enforcement and sanctioning
Page 43 and 44: 3 The SSM as part of European and g
Page 45 and 46: In 2016 the ECB in
Page 47 and 48: An ECB representat
Page 49 and 50: The Basel III reforms have not been
Page 51 and 52: Despite the significant efforts mad
Page 53 and 54: In the course of 2016 the E
Page 55 and 56: Supervisory Board Front row (from l
Page 57 and 58: Chart 8 Number of requests for revi
Page 59 and 60: Regarding gender diversity, the dis
Page 61 and 62: 4.4 Implementation of the Code of C
Page 63 and 64: 4.6 Data reporting framework and in
Page 65 and 66: • 1,295 public enquiries received
Page 67 and 68: supervisory fees (“the Fees Regul
Page 69 and 70: Total amount levied €404.5 millio
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More information on supervisory fee
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prudential purposes by national com
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Table 3a Composition of assets by r
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jurisdictions. Fit and proper asses
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SSM Regulation: the legal act creat
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ECB Annual Report on supervisory activities

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