How will ECB manage 12,000 open banking measures by refining oversight?

ECB's Dual Aim in Supervision

The European Central Bank (ECB), through Executive Board member Frank Elderson, outlined its refined approach to overseeing euro area banks on 6 October 2026. The strategy aims to improve the effectiveness of supervision while simultaneously simplifying regulatory processes. This dual objective is presented as mutually supportive rather than conflicting.

The central bank asserts that a more focused supervisory dialogue, which is easier for financial institutions to engage with, requires supervision to be concentrated on significant risks, operate with greater efficiency, and be more effective in prompting concrete and prompt improvements in banks with identified weaknesses.

Reducing Complexity Through Targeted Focus

The ECB's framework suggests that by concentrating on issues most critical for a bank's safety and financial soundness, supervisors can reduce unnecessary complexity for the institutions they oversee. This targeted approach leads to more direct discussions and a more focused follow-up process for addressing shortcomings until the underlying problems are resolved.

This allows both supervisors and banks to allocate more time and attention to the root causes of major weaknesses, while managing less impactful prudential matters in a more proportionate manner. The goal is to enhance supervisory outcomes while lessening the administrative load on banks.

Remediation and Escalation Measures

Analysing risks and identifying shortcomings are fundamental to supervision, but the ECB emphasises that supervision's true value comes from effective risk management and coverage. The timely identification of "findings" and the subsequent requests for "measures" to rectify them are critical components.

To simplify, the ECB permits banks to confirm action for low-severity findings without extensive documentation. However, for high-severity findings or measures that persist without significant progress, the ECB is prepared to escalate.

This includes employing more intrusive tools such as increased capital requirements, imposing business restrictions, or issuing periodic penalty payments to ensure timely remediation. By the end of 2025, approximately 12,000 outstanding measures were recorded across significant banks, averaging 100 per institution.

Implications for Asian Regulators

The ECB's strategy, which prioritises a risk-based and outcome-focused approach to banking supervision, offers a model for other jurisdictions addressing similar challenges.

Asian financial regulators, such as the Monetary Authority of Singapore or the Hong Kong Monetary Authority, could consider how a similar framework might streamline their own oversight processes without compromising financial stability.

For instance, evaluating the average number of outstanding supervisory measures per bank in their respective markets, similar to the ECB's reported 100 measures per bank by end-2025, could indicate areas where a more targeted approach to remediation might reduce administrative burdens and enhance the overall effectiveness of their supervisory efforts in 2027.

This could free up resources to address emerging risks, such as those from AI-powered cyberattacks or climate-related financial exposures, which the ECB also noted as growing concerns.