The ECB’s chief banking supervisor is keeping a close eye on the current situation.
Frankfurt ECB Chief Banking Supervisor Andrea Enria believes that the recent turbulence in the banking sector shows the need for strong supervision. “I would like to emphasize once again that being more risk-oriented does not mean that we are less involved,” said Enria on Tuesday at the Handelsblatt conference “Banking Supervision 2023” in Frankfurt.
On the contrary, supervisors place increasing value on structured escalation should banks’ progress fall behind clearly defined timetables. One example is the business with loans to highly indebted companies (leveraged finance). There, the supervisors acted against a dangerous increase in risks and the complacency of some banks.
“We also stand ready to step up our interventions in other areas where we see persistent inertia in bank response,” Enria said. In doing so, the supervisory authority will use the entire range of enforcement and sanction measures available.
The ECB monitors the major banks in the euro area. There are currently 111 institutes, including Deutsche Bank and Commerzbank in Germany. Even when it comes to risk data and reporting, banks that are appropriate here are still the exception. “And this despite the fact that the pressure from the supervisory authorities has increased sharply in recent years and a large number of findings have been made.”
The top banking supervisor of the ECB also commented on the recent course quake at Deutsche Bank. At the end of the week, the titles of Germany’s largest financial institution had temporarily fallen by 15 percent. “What really worried me was the level of nervousness that I saw in the market and among investors,” Enria said.
Röseler: “We are relaxed”
There are markets, such as CDS for individual credit default swaps, which are very illiquid and not very transparent. “We should have more transparency in these markets,” said Enria. If there were central clearing here instead of obscure over-the-counter (OTC) trading, that would be a step forward.
The top bank supervisor of the Federal Financial Supervisory Authority is relaxed with regard to the banking world.
The chief bank supervisor of the Federal Financial Supervisory Authority (Bafin), Raimund Röseler, spread calm at the conference. “We’re pretty relaxed,” even if there’s “a real nervousness in the market,” he said.
The Silicon Valley Bank (SVB) had “a super-specialized business model” with its focus on financing start-ups. Credit Suisse (CS) is a bank “that has been in deficit for decades, that has not got the problems under control,” said Röseler.
“We definitely don’t have such cases in the German banking market,” emphasized Röseler. Both SVB and CS have recently collapsed due to financial problems.
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“Of course we have problems with some German banks, but we don’t have a problem with the banking sector,” said Röseler. He “honestly doesn’t see the danger of a systemic crisis or that what happened there now would grow into a systemic crisis here”.
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