EBA: Ongoing progress on supervisory convergence is vital for the single market

The European Banking Authority (EBA) published today its first annual Report addressed to the EU Parliament and the Council on the convergence of supervisory review practices in the EU banking sector. The Report covers the findings of an assessment carried out over the past 3 years and focuses on Supervisory Review and Evaluation Process and assessment of risks (SREP), supervisory stress testing, ongoing review of internal models, and supervisory measures and powers.

The Report issued by the EBA identifies that supervisory authorities across the EU have made significant progress towards improving the convergence of their supervisory practices since 2011. Nonetheless, some differences remain in methodologies, practices and supervisory measures.

The EBA is building a Single Rulebook, and common rules are vital for the effective functioning of the single market. Nonetheless, consistency in supervisory risk assessments and outcomes is important for the effective oversight of cross-border banking groups and to ensure a level playing field for banks across the single market. 

The recently published EBA Guidelines on Supervisory Review and Evaluation Process (SREP), along with technical standards on for example internal model assessments are designed to reduce divergences in practice. Nonetheless, implementation of these products in a consistent way will be important. To that end the EBA will provide training and use monitoring tools to assess implementation in its next report on supervisory convergence in 2016.

Legal basis and next steps

The EBA is entrusted, in its founding regulation, with developing a Single Rulebook and recommendations, along with a European supervisory handbook, to ensure there is supervisory convergence and consistency of supervisory outcomes within the Union.  Moreover, Article 107 of Directive 2013/36/EU includes a specific mandate for the EBA on consistency of supervisory reviews, evaluations and supervisory measures in Member States. This Article also requires the EBA to report to the EU Parliament and the Council on the degree of convergence of those supervisory practices.

Based on this mandate, the EBA has collected information and analysed relevant supervisory practices and has engaged in a considerable development of regulatory products (Guidelines and Technical Standards), and promotion of convergence in supervision (participating in Colleges of Supervisors of cross-border institutions, developing a European Supervisory Handbook, providing dedicated training, conducting analytical and benchmarking activities).