ECB Refocuses On-Site Inspections

The European Central Bank (ECB) is reforming how it plans and conducts on-site inspections to make them more focused, timely, and risk-based, according to a new blog post by Patrick Montagner, a Member of the ECB’s Supervisory Board.

On-site inspections are essential for supervisors to gather direct evidence about how banks manage risks, make decisions, apply their internal policies, and design their internal models, Montagner explains. “Supervisors can examine the actual situation at a bank, identify potential material weaknesses and assess the potential implications,” he writes, adding that this provides banks and Joint Supervisory Teams (JSTs) with a clear basis for addressing weaknesses.

As part of its “next level supervision” initiative, the ECB’s Supervisory Board reviewed the organization of on-site investigations. The resulting action plan aims to integrate the planning of on-site inspections more closely with the work of JSTs. This integration is intended to reduce duplication, including unnecessary repetition of information requests, and ensure that findings feed seamlessly into ongoing supervision and the Supervisory Review and Evaluation Process (SREP).

To further enhance the efficiency of these investigations and their follow-up, the ECB has deployed new internal instruments, including an AI-based tool that provides supervisors with access to comparable findings and measures from across European banking supervision. “By supporting quality checks and helping teams draft findings more consistently, the tool should contribute to clearer reports, a more level playing field and more targeted supervisory follow-up for banks,” Montagner says.

The ECB is also introducing a new category of “very targeted missions” designed to optimize the duration of investigations and the size of supervisory teams. These missions can also be used to support the final closure of open supervisory measures. Additionally, credit file reviews are becoming more risk-based, with their scope calibrated to the specific risks being investigated. According to Montagner, these efforts are already producing benefits. In 2026, on-site reports were approximately 20% shorter on average compared to 2025. In addition, the average time from the start of an investigation to the issuance of the final report fell from 33 to 29 weeks.

Montagner also emphasizes the importance of transparent dialogue between supervisors and banks. “This dialogue does not prejudge the final assessment,” he writes. “It improves the evidence on which that assessment is based and enables both sides to understand the points on which they agree or differ. It also makes remediation more effective, as the bank has had an opportunity to understand what identified weaknesses are, and why they are significant.”