Effective supervision through timely remediation

European banking supervision is increasingly emphasizing the importance of effectiveness and timely remediation of supervisory findings in its dialogue with banks. There is also a focus on simplifying regulation and supervision while maintaining high standards.

Supervision that is more focused on material risks, efficient, and effective in driving improvements can help reduce unnecessary complexity for banks. When supervisors concentrate on issues that matter most for a bank’s safety and soundness, discussions become more targeted, and the follow-up process for remediation is more focused until issues are resolved.

Supervision creates value when it leads to effective risk management and coverage. ECB Banking Supervision stresses that all supervisory findings should be remediated in a timely and durable manner. For low-severity findings, banks are expected to confirm sufficient action without submitting further documentation. High-severity findings and measures that remain unresolved for years do not strengthen resilience or contribute to simplification.

Supervisors are prepared to escalate where necessary, using tools such as capital requirements, risk management enhancements, business restrictions, or penalty payments. These tools are used proportionately, considering the materiality, persistence, and responsiveness of the bank.

This approach aims to ensure supervision remains risk-based and outcome-focused, concentrating efforts where they have the greatest impact. Effectiveness and simplification are aligned in achieving a resilient banking sector through proportionate, impactful supervision.

In a complex external environment, supervisors must distinguish between critical issues and less consequential ones. By the end of 2025, the stock of outstanding measures increased to around 12,000, averaging 100 per bank, with varying severity levels. A tiered approach was introduced in 2025 to align follow-up with risk severity, allowing banks to close low-severity findings autonomously and focus on more significant issues.

This progress is reflected in the reduction of measures: in 2025, 1,200 more measures were closed than created, and the stock decreased by a further 600 in 2026. ECB Banking Supervision will continue to refine its focus through a review in mid-October, tailoring supervisory engagement based on risk profile and severity. Low-severity findings (F1 and F2) will be handled more proportionately, with some being communicated as observations or closed without further assessment.

Effective supervision requires addressing root causes of weaknesses. Banks must implement durable solutions with clear deadlines, and supervisors must be ready to escalate issues and enforce measures when needed. Supervision aims to prevent recurrence of weaknesses by tackling underlying issues, thus enhancing resilience and reducing future shortcomings.