Claudia Buch: European banking supervision a decade on - safeguarding banks' resilience amid global challenges

Speech by Prof Claudia Buch, Chair of the Supervisory Board of the European Central Bank, at the House of the Euro, Brussels, 12 February 2024.

The views expressed in this speech are those of the speaker and not the view of the BIS.

It is a great honour to speak to you today. The new year is well underway, but let me still wish you all the best for 2024.

Many Europeans look into the new year with concerns about the future. Immigration, the Russian war against Ukraine, geopolitics, inflation and climate change are mentioned as key concerns in recent Eurobarometer surveys.

We indeed live in a period of high uncertainty, characterised by "shifts and breaks", as President Lagarde said last year. Our economies and societies have been hit by several shocks in the past few years. There is high uncertainty surrounding the conjunctural outlook and, more fundamentally, the structural changes that lie ahead. Geopolitical risks, climate change, demographic trends and digitalisation are forcing us to adjust the way we produce and consume.

This uncertainty affects banks. In the short-term, higher interest rates have boosted their profitability. European banks have weathered recent storms thanks both to their own resilience and to the significant fiscal and monetary support that mitigated the impact of the recent shocks. However, in the longer term, banks will not be immune to risks and unexpected events. The currently good level of profitability provides an opportunity to build buffers to cushion shocks.

At the same time, a stable banking system is crucial for managing risks and promoting welfare.

Ensuring that the banks remain resilient is thus the central objective of European banking supervision. Resilience means that banks can absorb shocks – that they may bend under stress, but that they won't fall.

The banking union gives us the relevant tools and powers. It is one of Europe's major achievements. It was, ten years ago, the right response to the global financial crisis and the European sovereign debt crisis. With the Single Supervisory Mechanism (SSM) and the Single Resolution Board, we have strong frameworks and institutions to safeguard the stability of banks and to deal with stress events.