Euro Area: Publication of Financial Sector Assessment Program Documentation-Detailed Assessment of Observance-Basel Core Principles for Effective Banking Supervision

IMF Staff Country Reports, July 25, 2025

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Euro Area: Publication of Financial Sector Assessment Program Documentation-Detailed Assessment of Observance-Basel Core Principles for Effective Banking Supervision

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Bibliographic details

• Published: July 25, 2025
• Series: IMF Staff Country Reports
• DOI: https://doi.org/10.5089/9798229019897.002

Summary / Key findings

• Banking supervision has significantly strengthened since the last Financial Stability Assessment Program (FSAP).
• The European Central Bank (ECB), in cooperation with the national competent authorities (NCAs), is exclusively responsible for the prudential supervision of credit institutions (banks) established in the participating EU member states.
• Together the ECB and the NCAs form the Single Supervisory Mechanism (SSM) which became operational in 2014.
• The SSM has made significant progress in raising the quality of supervision of Significant Institutions (SIs) since 2014 and implementing the recommendations of the 2018 assessment of the compliance with the Basel Core Principles (BCP).
• Banking supervision is underpinned by a clear mandate and independence from government or industry interference in individual supervisory decisions.

Supervisory strengths and capabilities

• The SSM is a highly capable supervisor supported by excellent risk analysis and a robust skill set in all aspects of supervision.
• It conducts an intrusive approach to supervision, uses a broad range of tools and relies on a fully articulated supervisory framework.
• The SSM is extremely transparent in its approach to supervising banks.

Priority areas and effectiveness

• In areas that the SSM chooses to make a priority, it delivers a thorough assessment and has been effective in improving bank risk management. Examples of such priority areas include:
  • credit risk
  • liquidity risk
  • banks’ internal models
  • operational risk and resilience
  • climate-related financial risk

System resilience and response to shocks

• Banking systems, both globally and in the euro area, have been exposed to a series of severe shocks and the SSM has been agile in responding to these events.
• On average, banks in the euro area maintain solid capital and liquidity positions, well above regulatory requirements.

Subject focus and keywords

• Subject areas: Anti-money laundering and combating the financing of terrorism (AML/CFT), Credit, Credit risk, Crime, External balance assessment (EBA), External position, Financial regulation and supervision, Money, Operational risk
• Keywords: Anti-money laundering and combating the financing of terrorism (AML/CFT), banking supervision data division, Credit, Credit risk, EU parent undertaking, External balance assessment (EBA), Global, Operational risk, risk data aggregation, securities financing transactions regulation, SRM regulation, SSM framework regulation

Content in this bundle

• Introduction and Methodology
  • Introduction and Methodology (Markdown version)
  • Introduction and Methodology (PDF)