ECB Unveils New Supervisory Priorities for Banks in Belgium

The European Central Bank (ECB) has released its updated supervisory priorities for 2023-2025, outlining key areas of focus for banks in Belgium and across Europe. The move comes amidst a turbulent economic landscape, with the ECB highlighting new risks such as funding vulnerabilities and risk data aggregation.

Three Key Priorities

The ECB’s supervisory priorities are divided into three key areas, each with equal importance:

1. Strengthen Resilience to Immediate Macro-Financial and Geopolitical Shocks

• Focus on banks’ ability to withstand potential crises
• Targeted reviews on:
  • Loan origination
  • IFRS 9
  • Forbearance and UTP policies
  • Energy and commodity traders

2. Address Digitalisation Challenges and Strengthen Management Bodies’ Steering Capabilities

• Publish supervisory expectations on digital transformation strategies and governance arrangements
• Focus on:
  • Risk data aggregation
  • Reporting principles

3. Step-Up Efforts in Addressing Climate Change

• Targeted deep-dives to follow up on remediation plans following the 2022 climate risk stress tests and thematic review

KPMG Recommendations

KPMG banking and financial services professionals advise banks to:

1. Analyze the priorities
2. Identify challenging areas
3. Develop action plans to prepare themselves for supervisory examination plans

Key Takeaways

• Banks with material reliance on TLTRO III financing will face targeted reviews on this topic.
• Liquidity and fundings plans will be subject to scrutiny, with a focus on identifying weaknesses.
• Climate risk stress tests and thematic review will follow up on remediation plans.
• New ITS reporting and Pillar 3 disclosure requirements related to climate risk will require banks to prepare for benchmarking.

By prioritizing these areas, the ECB aims to ensure that banks in Belgium are better equipped to manage risks and maintain stability in the face of a rapidly changing economic landscape.