ECB’s Elderson calls for tighter focus, faster fixes in supervision

Frank Elderson, vice-chair of the European Central Bank’s Supervisory Board and a member of its Executive Board, said banking supervision needs to be more focused, more efficient and more forceful in getting banks to address weaknesses. He made the remarks in Bali on 30 September 2026 at a Basel Committee on Banking Supervision conference panel.

Elderson said the risk landscape facing banks is more uncertain, interconnected and volatile, and that supervisors should not try to watch everything all at once. In his view, European banking supervision now rests on sharper risk prioritisation, simpler and more efficient supervision, and timely remediation.

He said the ECB’s dedicated risk tolerance framework allows supervisors to decide how much residual risk can be accepted when some areas are reviewed less intensively or deferred. That means lower-priority areas at individual banks are not necessarily subjected to the same intensive scrutiny every year, while supervisors focus on what matters most.

For retail traders and other bank customers, the practical point is that the ECB is describing a supervisory approach built around material issues rather than maximum checking of every detail. Elderson said this still places more weight on supervisory judgment, and that banks themselves must play a part by applying the law based on materiality instead of seeking ever more guidance for legal certainty.

He also said the ECB’s Next Level Supervision initiative has reviewed supervisory processes end to end to reduce duplication and ask only for information that is strictly necessary. According to Elderson, more than 100 supervisory guidance publications have been reviewed, around 40 discontinued, and some revised or still under in-depth review.

On specific processes, he said approval times for standardised and less risky securitisations have been reduced from three months to an average of around seven days. He added that stress-testing data points have been cut by around 55%, turnaround times in fit-and-proper assessments have been shortened with digitalisation and AI-enabled tools, and approval timelines for capital-related decisions have been reduced from several months to less than six days.

Elderson said supervision also has to lead to timely remediation when weaknesses are found. He said supervisors need to be able to escalate findings and use the full toolkit, including capital requirements and qualitative measures that can require changes to governance, controls, processes, risk management or business-model practices.

He linked that need for action to the March 2023 banking turmoil, saying it showed how costly delays can be when known weaknesses remain unresolved. He said the International Monetary Fund and the Basel Committee on Banking Supervision agreed on that point in their post-mortem reports.

In the same speech, Elderson said growth, banking-sector competitiveness and financial stability are not competing objectives, and that strong prudential standards are one of the foundations of competitiveness rather than an obstacle to it. He also said international standards and supervisory cooperation remain essential as risks from cyber threats, quantum computing, non-bank financial firms and climate and nature-related risks continue to evolve.