ECB revised guidance

On governance and risk management for financial institutions

The main objective is to improve the operational resilience of banks, especially in the face of growing challenges from cyber threats and climate risks. The new guidance urges banks to integrate these risks into their business strategies, promoting sustainable models that take climate change and data management into account.

Focus on operational resilience and emerging risks

In the context of the update, the ECB emphasised the importance of proactively addressing operational risks, with a focus on the digital sector and business models related to environmental sustainability. Cyber-security is a central theme: the increasing digitization of banking operations makes banks more vulnerable to cyber-attacks. This means that institutions need to improve not only their technological defenses, but also their ability to respond quickly in the event of cyber disruptions or incidents.

Furthermore, the ECB highlighted climate change as an increasingly pressing challenge for the banking sector. Banks are urged to adopt climate risk management measures from an operational perspective and in their long-term business strategies. This involves assessing climate change-related financial risks, such as material damage to assets or the transition to a low-carbon economy.

Strong governance and sustainability

Corporate governance is another key pillar of the new ECB framework. The updated guidance emphasises the importance of strong governance structures, with boards having a clear understanding of the risks and business models they adopt. Transparency and accountability are key components of effective governance, which must ensure a balance between innovation and secure business models.

A crucial aspect is the role of banks in the transition to more sustainable business models. In line with the Paris Agreement and EU climate regulations, financial institutions must consider environmental sustainability as an integral part of their strategy. The ECB calls on banks to invest in green technologies and to align their investments and loans with environmental and social objectives.

European Accountability and Collaboration

The ECB, in its communiqué, also emphasised the importance of cooperation between financial institutions and regulators to ensure that these new guidelines are properly implemented. Through continuous and rigorous supervision, the ECB aims to create a more stable and resilient European banking sector, capable of facing domestic and global challenges.

In summary, revising the ECB guidelines is an important step towards greater resilience and sustainability of the European banking system. Financial institutions are called upon to play a key role in managing emerging risks while ensuring the soundness of their governance and a concrete commitment to environmental sustainability.

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Relevant Links:

https://www.bankingsupervision.europa.eu/press/pr/date/2024/html/ssm.pr240923~3487647ca3.en.html

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