Single Supervisory Mechanism
Measures taken in response to coronavirus (COVID-19) pandemic
Adoption date |
Type of measure |
Beneficiaries' sector specification |
Description of measure |
12.03.2020 |
Other measure |
Financial sector |
Frontloading the change in the capital composition of Pillar 2 Requirements (P2R), which was due to be implemented as of January 2021 (estimated system-wide CET1 capital release of EUR30bn) |
12.03.2020 and extended on 28.07.2020 |
Buffer usability |
Financial sector |
Tolerance of use of Pillar 2 Guidance and capital conservation buffer (estimated system wide CET1 capital release of EUR 90bn). On 28 July 2020 the ECB provided a formard-looking guidance on the timeline to restore buffers. Among other things, the ECB will not require banks to start replenishing their capital buffers before the peak in capital depletion is reached. The exact timeline will be decided following the 2021 EU-wide stress test and, as in every supervisory cycle, on a case-by-case basis according to the individual situation of each bank. In any case, the ECB commits to allow banks to operate below Pillar 2 Guidance and the combined buffer requirement until at least end-2022 without automatically triggering supervisory actions. |
12.03.2020 and extended on 28.07.2020 |
Liquidity measure |
Financial sector |
By allowing banks to go below the 100% LCR requirement, we show flexibility while ensuring effective and close supervision of their liquidity situation. In particular, the ECB will take a flexible approach when approving LCR restoration plans which banks are legally required to submit when breaching the LCR requirement. On 28 July 2020 the ECB provided a formard-looking guidance on the timeline to restore buffers. Among other things, the ECB allowed the banks to operate below the LCR until at least end-2021 without automatically triggering supervisory actions. |
12.03.2020 |
Other measure |
Financial sector |
The ECB is discussing with banks individual measures, such as adjusting timetables, processes and deadlines. For example, the ECB will consider rescheduling on-site inspections and extending deadlines for the implementation of remediation actions stemming from recent on-site inspections and internal model investigations, while ensuring the overall prudential soundness of the supervised banks. |
16.04.2020 |
Internal models |
Financial sector |
In order to mitigate the increase of the quantitative Market Risk multiplier, the ECB is temporarily reducing a supervisory measure for banks – the qualitative market risk multiplier – which is set by supervisors and is used to compensate for the possible underestimation by banks of their capital requirements for market risk. |
20.03.2020 |
Special provisioning policy |
Financial sector |
The ECB supports all initiatives aimed at providing sustainable solutions to temporarily distressed debtors in the context of the current outbreak. To this end, the ECB has introduced supervisory flexibility regarding the treatment of non-performing loans (NPLs), in particular to allow banks to fully benefit from guarantees and moratoriums put in place by public authorities to tackle the current distress. First, within their remit and on a temporary basis supervisors, will exercise flexibility regarding the classification of debtors as “unlikely to pay” when banks call on public guarantees granted in the context of coronavirus. The supervisor will also exercise certain flexibilities regarding loans under Covid-19 related public moratoriums. Second, loans which become non-performing and are under public guarantees will benefit from preferential prudential treatment in terms of supervisory expectations about loss provisioning. Lastly, supervisors will deploy full flexibility when discussing with banks the implementation of NPL reduction strategies, taking into account the extraordinary nature of current market conditions. |
20.03.2020 |
Special provisioning policy |
Financial sector |
Mitigating procyclicality of IFRS 9 projections by providing guidance on forecasting models and central macroeconomic scenarios to support banks in applying IFRS 9 provisioning policies Measure further implemented with letter to banks which details ECB SSM expectations and guidance |
20.03.2020 |
Special provisioning policy |
Financial sector |
Encouraging or requiring banks to mitigate procyclical effects by applying for transitional rules foreseen in the CRR. |
27.03.2020 and extended on 28.07.2020 |
Dividend distribution policy |
Financial sector |
On 27 March 2020 the ECB issued a recommendation asking banks to refrain from dividends and share buy-backs during COVID-19 pandemic until 1 October 2020. On 28 July 2020 the ECB extended its recommendation until 1 January 2020 and additionally requested banks to be extemely moderate with regards to variable remuneration. |
16.09.2020 |
Other measure |
Financial sector |
Euro area banks under ECB SSM direct supervision may exclude certain central bank exposures from the leverage ratio. Such exposures include coins and banknotes as well as deposits held at the central bank. |
27.03.2020 |
Other measure |
Financial sector |
ECB Banking Supervision has taken a pragmatic approach to implementing its annual core activity – the Supervisory Review and Evaluation Process (SREP). |