The European Central Bank's Banking Supervision arm has published the 2020 supervisory priorities of the Single Supervisory Mechanism and a risk assessment for 2020. ECB Banking Supervision has identified the following risks to the euro banking sector: (i) economic, political and debt sustainability challenges in the euro area; (ii) business model sustainability; (iii) cybercrime; (iv) execution risk related to banks' strategies for non-performing loans; (v) easing lending standards; (vi) repricing in financial markets; (vii) misconduct, money laundering and terrorism financing; (viii) Brexit; (ix) global outlook and geopolitical uncertainties; (x) reaction to regulation; and (xi) climate-change related risk.

The supervisory focus for 2020 will be to continue work to strengthen bank's balance sheets and enhancing the future resilience of banks. In particular, ECB Banking Supervision intends to prioritize, among other things, the following:

• addressing the level of NPLs and ensuring there is no further build-up;
• following-up on the adequacy of internal ratings-based models used by banks to calculate their capital requirements;
• continuing on-site visits to assess and address trading and market risks;
• assessing and analyzing bank underwriting criteria;
• continuing work to enhance internal capital and liquidity adequacy assessment processes, including carrying out on-site visits;
• assessing bank business models, with a focus on digitalization; and
• monitoring the implementation of Brexit contingency plans.

View the SSM supervisory priorities.

View the 2020 risk assessment.

[View source.]