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Sources of banking sector risk have been identified in cooperation with the national competent authorities and take into account input from the Joint Supervisory Teams (JSTs), ECB microprudential and macroprudential analyses, as well as reports by international bodies.
The key drivers of banking sector risks identified are: the protracted low interest rate environment, large stocks of non-performing loans (NPLs), geopolitical uncertainties, structural economic challenges in the euro area (including fiscal imbalances and debt sustainability concerns), the growth outlook in emerging market economies, banks’ reactions to new regulatory initiatives, developments in residential and commercial real estate markets, repricing of risk in financial markets, cybercrime and IT disruptions, cases of misconduct, non-bank competition, the potential failure of a central counterparty and a rigid business environment.
To ensure that banks address these key challenges effectively, ECB Banking Supervision has reviewed its supervisory priorities. The risk situation outlined above warrants a continuation of the high-level priority areas from 2017, albeit with amendments. In 2018 four priority areas will guide banking supervision:
For each of the priority areas, a number of supervisory initiatives will be carried out; the full implementation of such initiatives may span more than one year.