Claudia Buch: Hearing of the Committee on Economic and Monetary Affairs of the European Parliament

Introductory statement by Prof Claudia Buch, Chair of the Supervisory Board of the European Central Bank, at the Hearing of the Committee on Economic and Monetary Affairs of the European Parliament, Brussels, 27 March 2025.

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

It is my pleasure to report on the activities of ECB Banking Supervision and present our Annual Report for 2024, which is being published today. Last year marked the tenth anniversary of the Single Supervisory Mechanism, which was established in 2014 with a clear mandate to contribute to the safety and soundness of banks. More than 15 years after the global financial crisis and the European sovereign debt crisis, Europe can look back on a decade of financial stability. This is a crucial foundation for the real economy and contributes to the competitiveness of European firms.

Financial crises have occurred repeatedly throughout history, driven by excessive risk taking, insufficient regulation and weak supervision. They come at enormous economic, social, political and fiscal costs that can persist for many years.

To mitigate both the likelihood and the impact of financial crises, a comprehensive package of banking sector reforms has been implemented. Impact assessments show that these reforms have made the banking sector more resilient and that the benefits outweigh potential unintended side effects on lending or growth.

These benefits are clearly visible in Europe. The European banking sector now has solid capital and liquidity positions. For significant institutions, the aggregate Common Equity Tier 1 (CET1) ratio stood at 15.7% in the third quarter of 2024. The aggregate leverage ratio remained broadly stable at 5.8%. Banks adjusted well to a more restrictive monetary policy environment, with an aggregate liquidity coverage ratio of 158% in the third quarter of 2024. In 2024 bank profitability continued to benefit from the increase in interest rates observed since mid-2022.