SREP 2020

The ECB published the results of the Supervisory Review and Evaluation Process (SREP) for 2020. The key findings are as follows:

• Credit risk: The reduction of non-performing loans has slowed due to a deterioration in the economic situation. With the expiry of support measures, the risk of cliff effects may increase in 2021.
• Internal governance: Overall, risks were adequately addressed. In some cases, a lack of involvement at management level, deficiencies in the management of credit risks and structural weaknesses in the aggregation of risk data were identified.
• Business models: Concerns about the resilience of business plans, Due to falling profitability. This results in a trend toward more digitization, restructuring plans and consolidation measures.
• Capital resources: Concerns about the resilience of the regulation on capital planning for banks. Recommendation for greater capital headroom.

As a focus of work for 2021, the ECB Banking Outlook has announced the following priority areas: credit risk management, capital adequacy, business model sustainability and governance.

The full report can be found here.