Euro Area: Publication of Financial Sector Assessment Program Documentation-Detailed Assessment of Observance-Basel Core Principles for Effective Banking Supervision

International Monetary Fund

No 2025/215, IMF Staff Country Reports from International Monetary Fund

Abstract: Banking supervision has significantly strengthened since the last Financial Stability Assessment Program (FSAP). The European Central Bank (ECB), in cooperation with the national competent authorities (NCAs), is exclusively responsible for the prudential supervision of credit institutions (banks) established in the participating EU member states. Together the ECB and the NCAs form the Single Supervisory Mechanism (SSM) which became operational in 2014. The SSM has made significant progress in raising the quality of supervision of Significant Institutions (SIs) since 2014 and implementing the recommendations of the 2018 assessment of the compliance with the Basel Core Principles (BCP). Banking supervision is underpinned by a clear mandate and independence from government or industry interference in individual supervisory decisions. The SSM is a highly capable supervisor supported by excellent risk analysis and a robust skill set in all aspects of supervision. It conducts an intrusive approach to supervision, uses a broad range of tools and relies on a fully articulated supervisory framework. In areas that the SSM chooses to make a priority (e.g., credit risk, liquidity risk, banks’ internal models, operational risk and resilience, and climate-related financial risk), it delivers a thorough assessment and has been effective in improving bank risk management. Banking systems, both globally and in the euro area, have been exposed to a series of severe shocks and the SSM has been agile in responding to these events. On average, banks in the euro area maintain solid capital and liquidity positions, well above regulatory requirements. The SSM is also extremely transparent in its approach to supervising banks.

Keywords: risk data aggregation; SRM regulation; securities financing transactions regulation; SSM framework regulation; banking supervision data division; EU parent undertaking; Anti-money laundering and combating the financing of terrorism (AML/CFT); Credit risk; Credit; External balance assessment (EBA); Operational risk; Global (search for similar items in EconPapers)
Pages: 305
Date: 2025-07-25
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