Eurozone banks urged to plan for emerging risks

Claudia Buch, the new top regulator at the European Central Bank, has urged lenders to develop detailed plans for responding to emerging risks that could impact their business.

She emphasized the need for banks to anticipate risks and not only respond to them but also anticipate them. Buch, who became the third chair of the ECB’s Single Supervisory Mechanism, emphasized the need for supervisors to adopt a more “critical mindset” and emphasize the importance of anticipating risks and unexpected events.

The ECB will focus on these new risks by supplementing traditional models with scenarios, improving data and measurement, and interacting between bank-level and macro-level analysis.

The SSM will also carry out targeted reviews on banks’ funding plans as global regulators try to design policies for a world where bank runs materialize via smartphone apps rather than high street branches.

The ECB’s role as prudential supervisors is to ensure banks remain resilient, do not take excessive risks, and remain resilient even in times of stress.