The EBA sets EU-wide examination programme priorities for prudential supervisors for 2024

EBA published the ESEP for 2024, aiming to promote supervisory convergence by identifying key topics for heightened supervisory attention across the EU. EBA selected three key topics for supervisory attention in 2024: Liquidity and Funding Risk, Interest Rate Risk and Hedging and Recovery Operationalisation.
European banks face challenges related to liquidity and funding, including increased market volatility, rising interest rates, and the phasing out of specific funding programs. Supervisors are urged to assess banks‘ liquidity risk, funding profiles, and ability to manage liquidity and funding in a changing environment.
With the shift from an ultra-low or negative interest rate environment to higher and rising interest rates, banks need to effectively manage interest rate risk and hedging. Supervisors should ensure that banks have suitable organizational frameworks and risk management capabilities for interest rate risk, especially in light of increased rates and potential further rises.
Recent financial market events have emphasized the importance of crisis preparedness and the implementation of recovery plans. Supervisors need to assess the adequacy of recovery plans, the severity of scenarios, the calibration of recovery plan indicators, and the operational readiness of these plans.
EBA has also identified two Union-wide priorities for the period from 2023 to 2025: Firstly, monitoring and addressing financial stability and sustainability in the context of rising interest rates within the EU banking sector. The second priority aims to develop oversight and supervisory capacity for DORA and MiCA.
In addition to these key topics, the EBA encouraged supervisors to continue monitoring aspects such as asset quality, cyber risk, ICT security, and operational resilience. The focus on sustainable finance will persist, even if not highlighted as a key item for 2024, as supervisors gradually incorporate ESG risk supervision into their examination programs.