At the ECB Forum on Banking Supervision 2025, Claudia Buch, Chair of the ECB Supervisory Board, highlighted the growing complexity and risks in the global banking landscape. Banks are navigating heightened geopolitical tensions, digital innovation, weaker economic growth, and increasing calls to relax post-crisis regulations.
Global Risks and the Need for Guardrails
-
Nearly two-thirds of experts expect a more fragmented global order in the next decade.
-
In a “world of blocs,” financial markets could fragment, increasing operational complexity.
-
Multilateral cooperation is critical for global public goods, including financial stability.
Resilience as a Core Strategy
-
Banks must maintain strong capital and liquidity, robust governance, operational flexibility, and resilient IT systems.
-
Broad-based resilience allows banks to withstand shocks without compromising long-term profitability.
-
Effective supervision ensures banks follow good practices, manage geopolitical risks, and remain operationally and financially resilient.
Geopolitical Risk Exposure
-
Virtually all European banks are exposed via cross-border operations, outsourcing, and financial interconnections.
-
Cyberattacks and operational vulnerabilities have increased sharply.
-
Banks must integrate geopolitical risks as a cross-cutting driver in their risk management, covering credit, market, liquidity, governance, and operational risks.
Supervisory Response
-
ECB Banking Supervision is adapting to become more efficient, effective, and risk-based.
-
Key initiatives include:
-
Reforming the Supervisory Review and Evaluation Process (SREP) by 2026.
-
“Next-level supervision” to streamline inspections and decision-making.
-
Enhancing risk tolerance frameworks to target bank-specific vulnerabilities.
-
More agile and forward-looking stress tests, including “reverse” stress tests on geopolitical risks.
-
Streamlining reporting requirements and using suptech tools to focus on emerging risks.
-
Key Takeaways
-
Strong supervision and broad-based resilience are mutually reinforcing, not contradictory to competitiveness.
-
Banks must maintain robust financial, operational, and governance structures to continue serving the real economy during crises.
-
International coordination and stable regulatory standards are essential to prevent fragmentation and ensure that banks can navigate an increasingly complex and risky global environment.
