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ECB to Escalate Risk Data Supervision

ECB to Escalate Risk Data Supervision

by Starling Insights

Starling Insights Editorial Board

Mar 26, 2024


In a recent blog post, Elizabeth McCaul, a Member of the Supervisory Board of the European Central Bank, explains how the regulator is ramping up its supervision of risk data aggregation and risk reporting (RDARR).

"Our banking supervisors routinely identify issues, raise any concerns they have and ask banks to take prompt and effective remedial action," McCaul writes. “In recent years, many banks have failed to fully address the weaknesses identified in risk data aggregation and risk reporting. And some banks have not made adequate progress on implementing their remediation plans. Supervisors at the ECB are taking note and reviewing escalation options.”

McCaul emphasizes the importance of improving RDARR practices, as "[l]ow-quality information is likely to lead to low-quality risk management decisions." A bank's ability to manage its risk-related data is an essential component of its ability to govern risks effectively and make sound decisions, she argues.

Given McCaul's focus on supervisory technology (suptech), and especially those powered by AI, it is reasonable to expect that the ECB will look to apply those tools to its supervision of RDAAR practices. "[W]e must adopt a future-proof approach to understanding and using AI," McCaul wrote in an article published in Revue Banque late last month. “We should use it to enhance our internal supervisory capabilities and gain greater insights into the risks facing supervised banks as they, in turn, also deploy AI.”

For more on the ECB's supervisory priorities, and its adoption of suptech, don't miss Elizabeth McCaul's contribution to Starling's 2024 Compendium.

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