ECB’s Elderson sets out more selective bank supervision and faster decisions

European Central Bank supervisory official Frank Elderson said in Bali on 30 September 2026 that the ECB is giving lower-priority risks at individual banks less intensive scrutiny while speeding up routine decisions. The approach matters for banks because it changes where supervisors spend their time; Elderson said they must still identify serious weaknesses and ensure banks correct them.

Elderson, vice-chair of the ECB’s Supervisory Board and a member of its Executive Board, set out the approach at a Basel Committee conference of banking supervisors. He described three parts: sharper risk priorities, simpler and more efficient supervision, and timely correction of problems found at banks. His account sets out the ECB’s aims and reported process changes; their full effect on supervisory outcomes has yet to emerge.

How the ECB decides which bank risks to review

The ECB’s risk tolerance framework makes an explicit judgment about how much supervisory risk it can accept when it reviews an area less intensively or defers it, Elderson said. In practice, lower-priority areas at a bank will not receive the same depth of examination every year. He said this is a deliberate choice within the supervisory framework, made to concentrate attention on risks that matter most.

The approach predates the speech. The ECB’s 2025 supervision agenda says it introduced the framework in 2023 and pairs it with a multiyear review process. Supervisors carry out a core assessment each year, then select particular risk areas for closer examination according to a bank’s profile, the importance of the risk and emerging concerns. The agenda says a broader reform was decided in 2024, with full implementation planned for 2026.

Elderson said the need to choose priorities has grown as supervisors face geopolitical fragmentation, technological change, volatile energy and commodity prices, and stronger links between banks and non-bank finance. He also cited climate and nature-related risks. In his account, meeting formal capital and liquidity requirements is insufficient if weaknesses in governance, risk culture or a bank’s business model continue to build.

Which supervisory processes have become faster

Elderson gave several measures of the ECB’s simplification work. He said it had reviewed more than 100 supervisory guidance publications and discontinued around 40, while revising others or examining them further. He said the processing time for simple, standardised and less risky securitisations had fallen from three months to an average of about seven days. Capital-related approvals, he said, had gone from several months to less than six days.

He also reported a reduction of about 55% in stress-test data points and shorter fit-and-proper assessments using digital and AI-enabled tools. Those figures describe changes to particular processes, rather than a measured improvement in banks’ resilience. Elderson said simplification should free supervisory capacity for material risks while retaining the safeguards needed for safety and soundness.

The pressure to simplify reporting extends beyond the ECB’s own account. In a 27 September analysis for El País, Aitana Bryant and Esteban Sánchez described calls from both the ECB and Spain’s banking sector to reduce duplicated reporting. They distinguished the ECB’s proposed principles from the industry’s more specific measures and said a concrete timetable would be needed to turn simplification into applied rules.

What happens when supervisors find a weakness

Elderson said a more selective approach depends on supervisors acting firmly when they do find significant problems. He called for corrections that last and address underlying causes, including governance, risk management, internal controls and business models. Where necessary, he said, supervisors should escalate to enforcement rather than allow a known weakness to persist.

The ECB’s available measures include requirements to strengthen risk management, restrictions on a bank’s business and periodic penalty payments, Elderson said. He argued that supervisors should choose among them according to how serious and persistent a weakness is and how the bank responds. Citing the 2023 banking turmoil, he warned that satisfying formal requirements alone does not remove the danger of weaknesses accumulating beneath them.

The balance Elderson described remains to be tested over time. He said the full effects of the ECB’s increased supervisory risk tolerance will take time to appear, and that simplification initiatives will continue through 2026. The reported reductions in paperwork and decision times do not yet show whether supervisors will catch material risks more effectively or how quickly banks will remedy them.