Introduction
The ECB Onboarding workstream is designed to support banks who are transitioning to come under the supervision of the ECB. This change in supervisory authority typically signifies a shift to more intensive oversight, presenting various operational challenges for the institutions involved. Our role is to guide these banks through the complexities of ECB supervision, ensuring they understand and can effectively manage the new regulatory landscape.
Challenges
- Comprehensive assessment as entry point to the SSM
- Data
- Reputational risk and risk of non-compliance
- Methodology and Regulatory Guidelines
Comprehensive assessment as entry point to the SSM
The ECB performs an initial health check on banks that are newly classified or soon to be classified as significant, thus falling under direct ECB supervision. This ‘Comprehensive Assessment’ includes an Asset Quality Review (AQR) that scrutinises credit risk, market risk, and governance processes, and also places these banks into the regular supervisory stress tests conducted by ECB Banking Supervision.
Challenges faced by banks in the Comprehensive Assessment include providing consistent and detailed data, managing multiple complex requests simultaneously, and maintaining the timeliness and quality of their responses. These factors are critical to successfully navigating the Comprehensive Assessment process.
Data
High data quality is an integral part of every regulatory stress testing project. Collecting, validating, and providing the necessary data can be time-consuming and resource-intensive. Data granularity, availability, up-to-dateness, and proper alignment with the supervisory definitions might be a challenging process.
Reputational risk and risk of non-compliance
The ECB onboarding process itself can influence market perception and impact the reputation of the significant institution. Regulatory authorities, including the ECB, conduct in-depth assessments of a significant institution's risk management practices.
Establishing that these practices meet the high standards set by regulators can be a complex task. If a significant bank fails to comply with prudential requirements or with the measures adopted to address the non-compliance, the ECB can impose enforcement measures and impose sanctions.
Methodology and Regulatory Guidelines
After ECB onboarding, the bank is subject to continuous supervision and monitoring by the ECB to ensure ongoing compliance with regulatory standards. This process requires a thorough understanding and applying the ECB’s methodology, ensuring alignment between bank-internal models and methodologies and the ECB’s guidelines.
How we can help
PwC has supported numerous banks in various ECB Onboarding related projects.
As a leading consulting firm, we can work closely with your organisation to deliver high-quality outcomes across all aspects of the ECB Onboarding. We can also advise on value-adding initiatives, identify areas requiring enhancements, and support clients on ensuring compliance with regulatory requirements.
We can assist you with the following topics:
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