Claudia Buch, Chair of the ECB Supervisory Board, highlighted the resilience and stability of the euro area banking sector in her press conference on the 2025 Supervisory Review and Evaluation Process (SREP) results. She noted that banks remain well-capitalized (average CET1 ratio 16.1%) and liquid (liquidity coverage ratio 158%), despite operating in an environment of elevated geopolitical and macro-financial risks, including potential impacts from tariffs and trade tensions. Profitability has improved, with an average return on equity around 10%, although differences across banks and countries persist. Asset quality remains broadly sound, with a stable non-performing loan ratio of 1.9%, though some sectors—such as commercial real estate and SME lending—show higher vulnerabilities.
The ECB’s supervisory priorities for 2026–28 focus on two main areas:
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Strengthening banks’ resilience to geopolitical and macro-financial uncertainties through prudent capital management, credit standards, and climate- and nature-related risk oversight.
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Enhancing operational resilience and ICT capabilities, including monitoring banks’ digital and AI strategies and ensuring robust cyber-resilience.
Buch emphasized ongoing reforms to ECB supervision, including the SREP reform and the “Next Level Supervision” project, aimed at improving efficiency, reducing overlaps, and applying a risk-based approach. Targeted on-site inspections, better communication with banks, and increased use of SupTech tools are part of these improvements.
The 2025 SREP results show slight increases in overall SREP scores, with ongoing attention to credit risk, governance, operational risks, and capital adequacy. Pillar 2 requirements and guidance remain broadly stable, ensuring sufficient capital buffers while adapting to new risks such as interest rate changes in the banking book. Stress test results confirm the sector’s resilience, with no widespread capital shortfalls expected.
During the Q&A, Buch addressed topics including cross-border bank consolidation, simplification of capital requirements, AI investments, stablecoins, climate transition planning, and the ECB’s liquidity monitoring. Key points included:
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Banks have made significant progress on climate- and nature-related risk management, with most now considering these risks material. Transition planning will be further monitored in 2026.
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Supervision of AI and digitalisation is a priority, balancing opportunities with operational and reputational risks.
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Stablecoin risks are recognized but currently limited in scale; regulation and equivalence arrangements are essential to mitigate cross-jurisdictional issues.
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Banks remain liquid despite declines in ECB-provided excess liquidity, and weekly monitoring ensures early detection of potential stresses.
Buch concluded that well-capitalized, resilient banks are crucial for supporting the real economy, and that maintaining harmonized European supervisory standards, combined with adherence to global rules, is essential for long-term competitiveness and stability of the euro area banking sector.
