At a hearing of the European Parliament’s Committee on Economic and Monetary Affairs on 13 October 2025, Claudia Buch, Chair of the Supervisory Board of the European Central Bank (ECB), presented an update on the state of the European banking sector and the ECB’s supervisory priorities.
Buch underlined that European banks are operating in a challenging environment shaped by geopolitical tensions and higher tariffs. While this year’s stress test showed higher potential losses (€628 billion, up 14% from 2023), banks also demonstrated stronger capacity to absorb shocks thanks to higher profits and stronger capital buffers. The average capital ratio under the adverse scenario would fall from 16% to 12%, yet most banks would still meet regulatory requirements.
She highlighted the need for improved internal information systems and better risk data aggregation, which enable banks to react quickly to emerging risks. The ECB will continue focusing on qualitative improvements alongside quantitative supervision, with new capital guidance (Pillar 2 Guidance) results to be published in November.
Buch also noted the ECB’s ongoing reform of supervisory processes (SREP) to make them more efficient and risk-focused. The ECB is reducing procedural burdens, adopting digital tools, and implementing a more risk-based approach to capital-related decisions such as share buybacks.
On a broader scale, Buch welcomed the recent political agreement on the EU’s crisis management and deposit insurance framework, calling it a crucial step toward completing the banking union. She stressed the importance of progressing with a European deposit insurance scheme and harmonising national banking rules to strengthen resilience and integration.
Concluding her remarks, Buch warned that weakening regulatory standards would make European banks more vulnerable, not more competitive. “The current challenges call for more Europe, not less,” she said, urging coordinated action to preserve stability, trust, and the competitiveness of Europe’s banking system.