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ECB tells Banks what to expect in 2018

The European Central Bank (ECB) published its supervisory priorities for 2018 at the end of December 2017. The priorities are important for both directly and indirectly supervised banks as they identify where supervisors will focus resources in the coming year and drive the schedule of on-site inspections and thematic reviews.

The topics also inform the focus areas for the Central Bank in their engagements with Less Significant Institutions (LSIs). In 2018 four priority areas have been identified:

  1. business models and profitability drivers;
  2. credit risk;
  3. risk management;
  4. activities comprising multiple risk dimensions.

For each of the priority areas, a number of associated supervisory initiatives will be carried out. These initiatives will set the regulatory agenda for banks in 2018.

The ECB started publishing its supervisory priorities in 2015. There is considerable continuity between the overall priorities from year to year, the first two priorities being present since the ECB started publishing priorities.

Within the perennial topics of business model/profitability and credit risk, new supervisory initiatives such as analysis of Interest Rate Risk in the Banking Book (IRRBB) and exposure concentrations and collateral valuation have been added. They sit with the core initiatives in place since 2015 namely, focus on review of profitability drivers and approach to Non-Performing Loans (NPL) issue. 

Within the Risk Management heading (which is arguably a constant as well although the 2016 priority referred to Risk governance & data quality), unsurprisingly, TRIM, ICAAP, ILAAP and preparedness for IFRS are mentioned.

The new priority this year is called Multiple Risk Dimensions and focuses on Brexit preparations and stress testing, the former is especially relevant for the Irish significant institutions.

Grant Thornton has recently expanded its Regulatory Advisory offering with a dedicated Prudential Risk team to complement its existing Quantitative Risk practice which is the market leader in Ireland. With this focus, Grant Thornton is ideally placed to support banks with these regulatory challenges.

For further information, please contact Ciaran Rogers at or on +353 1 436 6510