Grant Thornton recently hosted a Regulatory Breakfast Briefing featuring our guest speaker, Isabel von Köppen Mertes. Isabel is from the ECB’s Directorate of Microprudential Supervison. She discussed the topic of regulation and the interplay with bank profitability.
Ciaran Rogers, our Head of Prudential Risk opened the briefing with observations on how banks are tackling the challenges of the prudential regulatory agenda. He mentioned the significant increase in resources and skills available to risk and compliance functions, the challenge of a much more demanding regulatory reporting regime and the simultaneous competing demands for similar resources created by the multi-pronged regulatory initiatives in the last few years.
Isabel presented on the topic of ‘Why the SSM focus on risk governance can be conducive to restoring business model sustainability’.
The main takeaways from Isabel’s contribution were:
- a robust level of profitability for banks is necessary to absorb expected and unexpected losses;
- the ECB’s thematic review on profitability has demonstrated that its feasible to be profitable in the current environment;
- the key to success are strong strategic steering capabilities and execution capacity; and
- the overall approach requires an efficient capital/liquidity allocation framework and appropriate pricing strategy to achieve profitability targets.
Grant Thornton has expanded its Regulatory Advisory offering with a dedicated Prudential Risk team to complement its existing market leading Quantitative Risk practice. With this focus, Grant Thornton is ideally placed to support banks with regulatory challenges.