The European Banking Authority published today its report on the functioning of supervisory colleges in 2017, which summarises the EBA’s assessment of the colleges’ activities against the EBA 2017 Colleges Action Plan and the relevant regulation(s).
Supervisory colleges are the main discussion table for coordination and programming of supervisory activities. The involved parties can share information about the supervised entity, conduct liquidity risk assessment and reach decisions both on the entity’s specific requirements and ad-hoc recovery plans needed.
The EBA identified four key topics worth of supervisory attention for 2017: non-performing loans and balance sheet cleaning, business model sustainability, operational risk (including conduct risk and IT risk) and comparability of risk-weighted assets (RWA). The report also assesses the extent to which these topics have been reflected in the colleges’ work program.
The report concluded that the risk assessment supplied by colleges, although different in granularity, well summarized the evaluation of supervisory activity. Nevertheless, in some colleges, no improvements were observed for what concerns the timely distribution of mandatory annexes, covering capital and liquidity measures.
Considerable ameliorations in the capital and liquidity joint decisions were also observed. The granularity of information underlying the level of capital which was finally required after the joint decisions has improved considerably too, together with the articulation of the Pillar 2 capital requirement.
Significant improvements have thus been achieved over the last couple of years in college interactions, responsiveness, and in the quality, coverage and reasoning of the joint decision documents. Further efforts are however expected both from home and host supervisors to enhance the joint decision processes.