Banking Supervision in a New Economy: Digitalisation, Climate and Rising Interest Rates

Covid-19, the Russian invasion in Ukraine and supply bottlenecks have recently been dominating themes in day-to-day policy discussions – also within banking supervision. These episodes have in common that they were triggered by exogenous shocks that originated outside the financial system. At the same time, those events have increasingly the potential to create important spill-over effects from the real economy to the financial system. Policy responses to these events from outside the scope of Banking Supervision may nevertheless pose major challenges for banking supervisors, triggered for example by increasing public and private debt from already high levels.

Beyond short term challenges the banking system is also exposed to more structural developments that will have to be managed by supervisors and banks in a forward-looking manner.

New (digital) technologies will be further developed, giving impetus to new financial service providers, thereby providing new opportunities but also creating new sources of risks.

Banks are expected to incorporate climate-related and environmental risks as drivers of existing risk categories into their risk management framework. Managing, monitoring and mitigating those risks over a sufficiently long-term horizon will be crucial. At the same time there is also a broader debate evolving on the role of banks in transition to a net zero economy.

The 2023 ECB Banking Supervision Research Conference (in hybrid format) will provide a forum to discuss these themes, aiming at building bridges between supervisory policies and practices on the one hand and academia on the other hand.

The organisers of the conference invite submissions of research papers that address these forward- looking issues, in particular:

Challenges and opportunities for of the future European banking system

• Impact of new technologies (Fintech, Crypto-Currencies, Digitalisation) on banking systems
• Management of Climate Risk and ESG challenges more general
• What will be the macroeconomic “New Normal” and its impact on banking systems?

Economic implications of recent regulatory changes for banks and banking behaviour

• Do differences in the regulatory framework and in banking supervisory practices between US and Europe lead to different economic outcomes and why?
• Is there a need for further regulatory reforms, including the area of macroprudential regulation, or would it rather be sufficient to make full use of the existing regulatory toolkit?
• What lessons can be learnt from the introduction of IFRS-9? For example, what might be likely impacts on banks’ incentives and economic behaviour with respect to loan/loss provisioning and the assessment of credit risks in unprecedented times? And what are the potential challenges for supervisors arising from those regulatory reforms?

Risks implied by elevated debt in the private and public sector

• Can we envision a revival of the sovereign/bank nexus? Are supervisors prepared?
• What risks for banks could emerge from higher (expected) inflation?
• What are the implications for banks if market induced interest rate risks would materialize?
• What are the implications of potentially higher debt fragility for the institutional structure of the European financial safety net?

Please submit your draft paper to ECB Banking Supervision at Banking_Supervision_Research_Conference_2023@ecb.europa.eu.

The submission deadline is 16 January 2023. Contributors will be notified by early March 2023.

Programme committee

• Thorsten Beck, EUI Florence, Chair
• Andreas Beyer, ECB
• Diana Bonfim, Banco de Portugal
• Jean-Edouard Colliard, HEC, Paris
• Klaus Düllmann, ECB
• Mariassunta Giannetti, HHS, Stockholm
• Jacob Gyntelberg, EBA
• Marie Hoerova, ECB
• Angela Maddaloni, ECB
• Loriana Pellizon, Goethe University, Frankfurt am Main
• Alexander Popov, ECB