Bundesbank symposium: digitalisation and Single Supervisory Mechanism in the spotlight

The Bundesbank’s “Banking supervision in dialogue” symposium ranks among the key forums for banking and financial supervisory topics in Germany. This year’s agenda included the tenth anniversary of the Single Supervisory Mechanism (SSM). Other topics covered by the symposium in Frankfurt am Main were crypto-assets regulation, and the impact of artificial intelligence on banks and supervision. Carmen Hentschel and Philipp Otto moderated the event, which was attended by around 450 representatives from the supervisory and banking communities.

“For me, the SSM shows that Europe is working”

Burkhard Balz during his video message at the Bundesbank Banking Symposium 2024 ©Nils Thies

Bundesbank Executive Board member Burkhard Balz sent a video message paying tribute to cooperation within the SSM;For me, the SSM shows that Europe is working, he said in a nod to the effective prudential teamwork across national borders as part of the SSM. Stefan Walter, CEO of the Swiss Financial Market Supervisory Authority FINMA, hailed the SSM as a major success story and essential for preventing future crises in the euro area. There was also a panel discussion on ten years of the SSM and whether integration had succeeded featuring the panellists Nicolas Véron (Bruegel, PIIE), Thomas Groß (Helaba), Sabine Lautenschläger (Covington & Burling LLP) and Anneli Tuominen (ECB).

Balz: AI likely to totally transform all our lives

Panel at the Bundesbank Symposium 2024 ©Nils Thies

Mr Balz used his speech to look into the future of the financial sector, predicting that it would be shaped by artificial intelligence, crypto-assets, the cloud and – needless to say – banks. AI, he argued, was likely to totally transform all our lives, and banking business was no exception. The future would see more possible use cases for AI, from credit assessments all the way to risk management models. Looking into the distant future, regulation might be the only thing that stands between us and a bank that is run entirely by artificial intelligence. Mr Balz went on to stress that AI needed a regulatory framework. And just as it was with crypto-assets, he said, Europe was playing a pioneering role on this front. The AI Regulation – the AI Act – meant that a cross-sectoral regulatory framework had now been put in place at the European level to govern the uses of AI technology.

Walch: Institutions’ IT security particularly important

Karlheinz Walch at the Bundesbank Symposium 2024 ©Nils Thies

Karlheinz Walch, Director General Banking and Financial Supervision at the Bundesbank, spoke about supervisory topics of the future, singling out three broad themes. The first concerned credit risk, which he mainly attributed to the persistently subdued economic activity. Recent quarters had seen a marked uptick in insolvency numbers, he remarked, though the increase had started from a low level. Second, he said supervisors would take interest rate developments as a cue to take a deep dive into credit institutions’ liquidity situation and interest rate risk. Mr Walch’s third point concerned the particular importance of institutions’ IT security. A great deal of catching up needs to be done – institutions have to invest in this and bring their IT security management into line with the increased risks. He went on to underline the importance of good governance for ensuring the future viability of credit institutions. Practising good governance and embracing a risk culture are indispensable, he remarked, noting that these safeguarded integrity and transparency, besides mitigating the risk of mismanagement, misconduct and fraud.

Digitalisation in the financial sector

Claudia Buch giving a speech at the Bundesbank Symposium 2024 ©Nils Thies

Claudia Buch, Chair of the Supervisory Board of the ECB, briefed symposium participants on the reform of the Supervisory Review and Evaluation Process (SREP) decided on in May 2024. She explained how the reformed SREP would use the full supervisory toolkit. The reforms, she said, would make supervision more efficient, more effective and more risk-oriented. Changes would be implemented gradually, starting in the second half of 2024, and would be finalised for the 2026 SREP cycle. From 2026 onwards, SREP decisions will be sent to most banks by the end of September, rather than December as is currently the case, Ms Buch announced.

The banking symposium’s afternoon session turned its attention to digitalisation in the financial sector. Doris Dietze from the German Federal Ministry of Finance held a talk on the Markets in Crypto-Assets Regulation (MiCAR) and on regulation in the crypto space, while Marilin Pikaro (EBA) and Philipp Fuerst (Capgemini) shared their thoughts on the EU Regulation on digital operational resilience for the financial sector (DORA) and AI in banking business.

The Bundesbank organises the banking symposium every year, and this year’s symposium was already the 25th of its kind.