TL;DR
Get smart everyday buys delivered free — and shop member deals
- Fast, free delivery on millions of items
- Access to Prime Big Deal Days deals on October 6–7
- Prime Video, Amazon Music and more included
Frank Elderson told an international banking supervisors’ conference in Bali on 30 September that European banking supervision is adapting to a more uncertain and interconnected risk landscape. He described three priorities: sharper risk selection, simpler supervisory processes and timely remediation, while saying the approach is intended to preserve bank safety and soundness.
European banking supervision is placing more emphasis on selecting the most material risks, simplifying supervisory work and securing timely remediation, ECB Vice-Chair Frank Elderson said on 30 September at an international conference in Bali. His remarks set out how the European Central Bank’s supervisory approach is being adapted to a more uncertain and interconnected financial environment.
Elderson, who is also a member of the ECB Executive Board, spoke on a panel titled “Navigating the new financial landscape” at the Basel Committee on Banking Supervision’s international conference of banking supervisors. He described three mutually reinforcing elements of the European approach: sharper risk prioritisation, simpler and more efficient supervision, and timely remediation of shortcomings.
On prioritisation, Elderson said supervisors should not try to examine every risk at every bank in equal detail every year. The ECB’s dedicated risk tolerance framework sets out how much residual supervisory risk may be accepted when some areas receive less intensive review or are deferred. He characterised that de-prioritisation as a deliberate supervisory judgment, rather than an accidental consequence of limited resources.
On efficiency, Elderson cited the ECB’s Next Level Supervision initiative. The ECB has reviewed more than 100 supervisory guidance publications; around 40 have been discontinued, while others have been revised or are under further review. He also said average processing time for standardised, lower-risk securitisation approvals had fallen from three months to around seven days. The speech further cited a reduction of about 55% in stress-testing data points and faster fit-and-proper assessments through digitalisation and AI-enabled work.
How ECB Priorities May Shift
The speech describes a change in how supervisory attention is allocated, with greater weight on risks judged material to a bank’s safety and soundness. Elderson said formal compliance with capital and liquidity requirements alone may not reveal weaknesses in areas such as governance, risk culture or business models. He pointed to the 2023 banking turmoil as a reminder that such weaknesses can build up even when formal requirements are met.
For banks, a simpler process could mean fewer data requests, shorter approval timelines in some cases and less recurring scrutiny of lower-priority areas. For supervisors, the stated aim is to free capacity for closer examination of material risks while keeping safety and resilience standards in place. The figures and examples in the speech describe ECB work to date; they do not establish how every bank or supervisory process will be affected.
Elderson also framed the cultural change as a shared responsibility. He said banks should take responsibility for applying the law based on materiality and avoid repeatedly seeking guidance solely to obtain a higher degree of legal certainty. At the same time, a simpler, less prescriptive framework makes sound supervisory judgment more important, because rules cannot spell out every emerging risk or individual business model.
Top picks for "frank elderson supervisory"
As an affiliate, we earn on qualifying purchases.
Why Supervision Is Being Reworked
Elderson described banks as operating amid geopolitical fragmentation, rapid technological change, volatile energy and commodity prices, inflation, demographic shifts and closer links with non-bank financial institutions. He also identified persistent climate and nature-related risks. His argument was that the challenge is not only a larger list of risks, but greater uncertainty, interconnection and volatility among them.
The 2023 banking turmoil is the specific recent episode he cited to explain why supervisors need to look beyond minimum capital and liquidity metrics. In his account, formal compliance can coexist with accumulating weaknesses elsewhere. The ECB’s response, as described in the speech, is to focus on material risks across capital, liquidity, governance, operational resilience and structural drivers, while allowing lower-priority areas to receive less intensive attention in a given year.
Elderson also referred to a recent European Commission report on banking competitiveness, saying it highlighted the shared responsibility for creating a less risk-averse and more agile environment. The ECB’s Next Level Supervision initiative is the operational counterpart in his account, covering reviews of supervisory procedures and guidance.
“In a more complex world, effective supervision requires clearer, forward-looking prioritisation.”
— Frank Elderson, ECB Vice-Chair of the Supervisory Board
What the Speech Leaves Open
The speech does not specify which individual banks or risk areas will receive less intensive scrutiny, or how the ECB will set acceptable residual risk in particular cases. Elderson said the full effects of the risk tolerance framework would take time to emerge, so the longer-term impact remains uncertain.
He described efficiency results in selected processes but did not provide a complete account of how much total supervisory time or cost the changes have saved. The cited reduction in stress-testing data points and faster assessment timelines also do not, on their own, show whether outcomes or burdens have changed for every supervised bank.
The remarks do not set out a timetable for completing the review of guidance publications or detail the next steps for the timely-remediation pillar. They also leave open how banks and other stakeholders will respond to Elderson’s call for more responsibility in applying rules based on materiality.
Next Steps for ECB Supervision
The ECB’s supervisory teams are expected to continue implementing the risk tolerance framework and Next Level Supervision work described by Elderson. That includes ongoing review of guidance, procedures and the allocation of attention across risks and institutions. The speech gives no specific schedule for completing those efforts.
The next evidence of the approach’s effects will come from its application over time: how supervisory reviews are prioritised, whether process timelines remain shorter in the cited areas, and how quickly banks address identified weaknesses. Elderson said the cultural shift would take time and would require participation from banks as well as supervisors.
Key Questions
What did Frank Elderson announce?
He outlined the ECB’s approach to adapting European banking supervision through risk prioritisation, simpler processes and timely remediation. The speech described ongoing work and results; it did not announce a single new rule or a fixed implementation deadline.
What is the ECB risk tolerance framework?
It is a framework Elderson said helps clarify how much residual supervisory risk may be accepted when some areas are reviewed less intensively or deferred. He described those decisions as deliberate judgments about where supervisory attention should be focused.
Does simplification mean weaker bank safeguards?
Elderson said the aim is to make supervision easier to navigate and free capacity for material risks without lowering guardrails or weakening resilience. The speech did not provide a full evaluation of the effects across all supervisory work.
What process changes did Elderson cite?
He said the ECB reviewed more than 100 guidance publications, discontinued around 40, reduced average processing time for standardised, lower-risk securitisations from three months to around seven days, and cut stress-testing data points by about 55%.
What remains uncertain?
The speech did not identify which banks or risks will be reviewed less intensively, set a timeline for completing the changes, or quantify their overall effect. Elderson said the full impact would take time to emerge.
Source: primary
Fall Picks
fall essentials
As an affiliate, we earn on qualifying purchases.
