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ECB Vice-Chair Frank Elderson outlined a supervisory approach built around sharper risk prioritisation, simpler processes and timely remediation. He cited changes including shorter processing times for certain securitisations and fewer stress-testing data points, while saying the full effects will take time to emerge.
Frank Elderson, Vice-Chair of the European Central Bank’s Supervisory Board and a member of its Executive Board, said European banking supervision is sharpening its focus on material risks and simplifying procedures as the financial environment grows more uncertain. Speaking at a Basel Committee conference in Bali on September 30, 2026, he outlined three pillars: risk prioritisation, more efficient supervision and timely remediation.
Elderson said supervisors face a risk landscape shaped by geopolitical fragmentation, rapid technological change, volatile energy and commodity prices, inflation, demographic shifts, closer links with non-bank financial institutions, and climate and nature-related risks. He argued that the answer is not to monitor every risk at every bank in equal detail each year. Instead, supervisors need to decide more clearly where scrutiny is most valuable.
He described the ECB’s risk tolerance framework as a way to make that prioritisation deliberate. It sets out how much residual supervisory risk may be accepted when some areas receive less intensive review or are deferred. Elderson said this is an active supervisory judgment, rather than simply an omission caused by limited resources. Lower-priority risks at individual banks may consequently receive less intensive scrutiny in a given year.
On efficiency, Elderson cited the ECB’s Next Level Supervision initiative, which reviews processes to reduce duplication, speed decisions and limit requests to necessary information. The ECB has reviewed more than 100 supervisory guidance publications; around 40 have been discontinued, while others have been revised or remain under review. He also said average processing time for standardised, lower-risk securitisations had fallen from three months to about seven days, and stress-testing data points had been reduced by around 55%.
How the ECB Is Refocusing Supervision
The approach could change how supervisory capacity is used across European banks. Elderson said supervisors would direct attention to material risks, including governance, risk culture, business models and operational resilience, even when a bank meets formal capital and liquidity requirements. He cited the 2023 banking turmoil in discussing vulnerabilities that may not be captured by compliance with minimum requirements.
Elderson said simpler procedures could reduce time spent by banks and supervisors on duplicate requests and routine reviews. The ECB aims to preserve safety and soundness while making the framework easier to navigate. He said the approach involves accepting that some risks receive less scrutiny and requires supervisory judgment. Faster processing times alone do not establish whether the approach has improved outcomes.
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From Minimum Rules to Material Risks
Elderson’s remarks place risk-based supervision at the centre of the ECB’s response to a more interconnected and volatile financial system. He said the 2023 banking turmoil showed that formal compliance can coexist with weaknesses that build up beneath the surface. The ECB’s stated focus therefore extends beyond capital and liquidity to governance, operational resilience and structural risks, including climate, nature and geopolitical exposures.
The speech also links supervisory changes to a broader debate about European banking competitiveness. Elderson referred to a recent European Commission report and said a less risk-averse, more agile environment is a shared responsibility. In his account, banks also need to apply laws according to materiality and avoid seeking guidance simply to secure ever-greater legal certainty. He cautioned that simpler rules increase, rather than reduce, the importance of supervisory judgment.
“In a more complex world, effective supervision requires clearer, forward-looking prioritisation.”
— Frank Elderson, ECB Supervisory Board Vice-Chair
What the Changes Have Yet to Show
Elderson said the impact of the new approach is beginning to emerge, but that it will take time for its full effects to be felt. His remarks did not provide a quantified assessment of whether prioritisation or process changes have improved supervisory outcomes, or how the ECB will measure that effect. The speech also did not specify which risk areas at particular banks will be reviewed less intensively, or how the risk tolerance framework will be applied in individual cases.
The ECB’s cited figures describe process changes, including fewer data points and faster securitisation approvals. They do not establish whether banks have become safer or whether supervisory decisions have become more effective. Elderson also offered no detailed timetable for the remaining reviews of supervisory guidance.
Further Reviews and Measured Results
The ECB plans to continue reviewing its supervisory guidance and processes under the simplification effort; some publications are still undergoing more in-depth review. Elderson’s account indicates that supervisors will continue putting the risk tolerance framework into practice, with lower-priority areas receiving less intensive attention where appropriate.
The next evidence of progress will be whether the ECB can show that quicker, simpler processes release capacity for material risks while maintaining banks’ safety and soundness. Elderson said that assessment will take time. His speech did not announce a date for a further progress report.
Key Questions
What did Frank Elderson announce?
He described a three-part approach to European banking supervision: sharper risk prioritisation, simpler processes and timely remediation. His remarks were an account of the ECB’s supervisory direction, rather than an announcement of a single new rule.
What is the ECB’s risk tolerance framework?
Elderson described it as a framework for deciding how much residual supervisory risk can be accepted when some areas receive less intensive review or are deferred. It is intended to make those choices deliberate and institutionally supported.
What process changes did Elderson cite?
He said the ECB reviewed more than 100 guidance publications, discontinued around 40, reduced stress-testing data points by about 55%, and cut average processing time for standardised, lower-risk securitisations from three months to around seven days.
Does less intensive review mean lower safety standards?
Elderson said simplification is intended to free capacity for focused review without lowering guardrails or weakening resilience. Whether the approach achieves that in practice remains to be assessed over time.
Source: primary
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