On-site inspections: What to expect from the ECB

On-site inspections: What to expect from the ECB

Closer detail of the recent Supervisory inspections, and what will the guide include.

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On-site supervision

Harmonisation within the Single Supervisory Mechanism (SSM) community is a broadly understood goal of the new supervisory landscape. Such purpose is undertaken through the harmonisation of methodologies and approaches and the close collaboration between the European Central Bank (ECB) and the National Competent Authorities (NCAs) with respect to different supervisory processes, such as the on-site inspections.

In this regard, the ECB is currently drafting a ‘Guide to on-site inspections’, aimed at achieving higher transparency and a more efficient process. The aforementioned document will be published for public consultation soon in order to receive the industry feedback.

Among the key topics covered in the guide are:

  • the overview of the different inspection phases
  • the outline of key stakeholders
  • the decision making process leading to an on-site inspection
  • the outline of supervisory and investigatory powers; and
  • the outline of the cooperation expected from inspected legal entities

The guide is intended to facilitate the progress of an inspection as well as the communication between on-site teams and significant institutions; it is not legally binding but a reference for institutions.

On-site inspections are planned and staffed in close cooperation between the ECB and NCAs, but the NCAs provide most of the head of missions and team members. According to the ECB Annual Report on supervisory activities, in 2015 NCAs provided 906 inspectors for inpsections, accounting for 95% of the on-site resources, while the remaining 5% were provided by the ECB. Inspectors from the ECB (COI Division) led 26 of the missions in 2015; in 2016, the estimated number is 19. The SSM is also using resources from auditing firms to support the on-site inspections, however these team members cannot lead the missions.

The number of on-site inspections has decreased from 2015 to 2016, both in total number (250 approved missions in 2015 against 193 estimated figures in 2016) and per bank cluster1.

Overview of OSI bank per cluster

The risk types with higher number of inspections, such as Credit risk and Governance, coincide with the ECB’s Supervisory Priorities for 2016.

The number of inspections on profitability has increased and giving that it remains a priority for 2017, one could expect this number to increase further.

However, in absolute numbers, it’s still far behind the typical risk types, such as credit- or operational risk.

To compliment the 2017 on-site inspections there will be a new supervisory process referred to as ‘deep-dives’. As the name indiciates these deep dives refer to deeper investigations that will be pursued by the joint supervisory teams and will not include the on-site inspections staff; and will be more limited scope. In general, the deep dives are expected to focus on Profitability drivers, IFRS 9, non-performing loans, BCBS239, ICAAP and ILAAP, and Outsourcing.

Overview of OSI per risk type


1The banking groups directly supervised by the ECB are broken down by size into five clusters with cluster 1 hosting the largest and cluster 5 the smallest.

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