On Wednesday 28 January, Dutchman Frank Elderson, Vice-Chair of the Single Supervisory Mechanism (SSM) and candidate for a new three-year term, called for European banks to be better able to absorb “geopolitical shocks”, making reference to Russia’s military aggression against Ukraine in 2022, which triggered an inflationary shock in the euro area.
In response to Anouk Van Brug (Renew Europe, Dutch), Mr Elderson indicated that the SSM Council was in the process of carrying out a stress test that focussed on “geopolitical risks”, without a pre-established scenario, but which asks European banks to consider a specific shock that would lead to a depletion of capital of 300 basis points.
Luděk Niedermayer (EPP, Czech) asked whether European banks were not excessively exposed to non-EU service providers.
Mr Elderson agreed with this. With the ‘DORA’ regulation, the single banking supervisor can oversee the way banks manage their IT risks. “There is still work to be done in this area”, he said, referring to a “high level” of external dependency in the Cloud sector. In view of the geopolitical risks, he felt that it was “even more urgent” to achieve the banking union, integrate the financial markets and introduce the digital euro, in order to reduce Europe’s “dependence” on third-country payment service providers.
On Wednesday, at a conference organised by the European Banking Federation, the European Commissioner for Economy, Valdis Dombrovskis, spoke of the risks inherent in the EU payments sector, which is “highly dominated by non-European providers”. “This makes us dependent on foreign-owned companies in an increasingly polarised and fragmented world. Ceding such a degree of technological control over the EU’s economy to others could impede our ability to act autonomously”, he warned, convinced that “the digital euro is the solution”.
In addition to heeding the geopolitical risks, the SSM Council will ask banks to take action in 2026 and 2027 to minimise the risk of disruption to their critical operations, with a focus on cyber security and managing the risks associated with artificial intelligence and crypto-assets.
Climate. Several MEPs – Markus Ferber (EPP, Germa), Enikő Győri (PfE, Hungarian), Bas Eickhout (Greens/EFA, Dutch) – questioned the Vice-President of the SSM Council on the action of the single supervisor in the management of climate risks by the banking sector.
In the climate field, “we are a body that applies the rules, not adopts them”, noted Mr Elderson, for whom the ECB’s action on climate issues is equivalent to its analysis of the risks associated with US tariffs or security and defence issues.
In his view, the banks have made significant progress in managing climate risks over the last five years. Based on an ECB stress test, Mr Elderson also pointed out that procrastinating in this area will result in higher costs and more intrusive remedial action for the financial sector.
Simplification. Like Luis de Guindos (see EUROPE 13787/19), the member of the ECB’s Executive Board was of the opinion that banking prudential rules do not act as a brake on lending to the real economy.
Asked by Aurore Lalucq (S&D, French) about where the line is between simplification and deregulation, Mr Elderson advocated measures to reduce the complexity of supervision in order to help supervisors “focus on the main risks” while maintaining the current level of resilience of the banking sector.
It is also a question of making our procedures more efficient, in particular by reducing the time taken from a period of two months to three weeks in respect of our supervisory decisions, he added.
See the SSM Council’s supervision priorities for 2026 and 2027: https://aeur.eu/f/kgd (Original version in French by Mathieu Bion)